Thread: Feldstein: Tax Rebate Was a Flop

Feldstein: Tax Rebate Was a Flop

Friday, August 15, 2008 9:14 AM

The tax rebate enacted by Congress to stop a recession in the United States was a flop, Harvard University professor Martin Feldstein wrote in a Wall Street Journal editorial.

Only between 10 and 20 percent of the rebate dollars were spent, according to government statistics. Some had hoped that 50 cents of every rebate dollar would be spent by consumers.

"The evidence is now in, and that optimism was unwarranted. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity," Feldstein wrote.

With most of the rebate checks cashed, it is obvious the plan failed, he said. Consumer confidence in the economy was not boosted by this fiscal bailout idea.

Instead, the rebate plan backfired. It only added about $20 billion to consumer spending, while about $80 billion was added to the national debt.

In the second quarter, $78 billion in tax rebates were sent out. Data show that most consumers used their tax rebate checks to pay off their debt or saved the money.

"The government's recent GDP figures show that the level of consumer outlays only rose by an extra $12 billion, or 15 percent of the lost revenue," Feldstein said.

"The evidence of a very limited effect on spending is also clear in the monthly retail sales, a measure that is narrower than total consumer outlays because it excludes things like utility bills and rent. Retail sales were $342 billion a month in January through April and rose to only $346 billion in May and June."

Democratic presidential nominee Barack Obama's proposal to distribute $1,000 rebate checks to low- and middle-income workers will cost $65 billion and is likely to have the same result as the failed tax rebate plan, Feldstein wrote.

Obama's plan is to finance those rebates with an extra tax on oil companies would only result in higher oil prices, he said.

Since the government's plan flopped, Obama's plan will also fail to stimulate the economy, Feldstein wrote.

The rebate checks would do "little to raise consumer spending and stop the decline in employment. If the past is an indicator of what would happen, the $65 billion Obama proposes to spend on this plan would raise consumer spending by only about $10 billion, or less than one-tenth of 1 percent of GDP."

http://money.newsmax.com/streettalk/tax ... ode=67F1-1

If people want to fix the economy, there is a way to do it. The even better news is that Congress can be our heroes and do it all. Our economy is tied up in a knot choking itself to death from laws and policies intended to suffocate the US Economy into bankruptcy. These laws and policies need to be changed and changed immediately.

First, the US Economy isn't in a recession, it's in a Depression which is why the government can't seem to figure out what is going on because what is happening doesn't meet their definition of a recession. What is happening doesn't meet their definition of a recession, because we aren't in a recession, we're in a Depression.

Second, recessions can correct over time without changing policy and laws, they are normal economic medicines if you will that happen naturally, the ups and downs, the ebbs and flow of normal market factors. A Depression is the result of an economic structure that doesn't support itself, has no foundation, and is a House of Cards. Everyone knows from history the suffering and agony of the Great Depression, but that Depression was the result of primarily banking errors and failures, problems related to the policies and practices of one capital market sector which then cascaded down upon all the other sectors from lack of normal capital availability. What we're experiencing today is the result of a failed national economic policy in every sector, not just one that cascaded down upon the others so that when we fix the one the others will self-correct. What is happening today is every sector is imploding internally because they have no base, no root, no foundation.

Third, to fix the US Economy, we have to untie the knot that is choking it to death so it has a foundation, roots and a base to support and sustain it. Our economy is like a plant. Where a plant needs soil, water, nutrients, sun and management to survive and flourish our economy needs free market production here, not over there, it needs American Workers, not illegal aliens, it needs a 10-page FairTax law, not the current 66,000-page Infernal Revenue Code, it needs trade surpluses from protected trade, not trade deficits from Free Trade, it needs personal freedom, not a police state.

So, how can Congress with a few strokes of a pen save the United States and the US Economy?

It's not complicated, it's very simple.

1. Stop Illegal Immigration, Enforce US Immigration, US Labor and US Civil Rights Laws to the letter with zero exceptions. Congress needs to Pass the Save Act immediately making e-verify mandatory for all employers and expand funding for the 287 (g) program sufficient to train every law enforcement officer in the United States to arrest and detain every illegal alien in the United States and process them for immediate deportation under ICE supervision under no-nonsense due process of law which means all minor offspring are deported with their parents.

This corrects the bloated population and labor market. This frees up jobs for American Workers to whom all these jobs belong as a matter of law and constitution. This reallocates incomes and earnings through normal free market, supply and demand channels. This reduces both poverty and unemployment presently ruining the lives of our people. This reduces the cost burden on federal, state and local treasuries that provide poverty and unemployment safety nets bankrupting our governments.

http://en.wikipedia.org/wiki/United_Sta ... dget,_2009

# Mandatory spending: $1.89 trillion (+6.2%)

* $644 billion - Social Security
* $408 billion - Medicare
* $224 billion - Medicaid and the State Children's Health Insurance Program (SCHIP)
* $360 billion - Unemployment/Welfare/Other mandatory spending
* $260 billion - Interest on National Debt

The US Government spends $224 Billion on MediCaid and SCHIP and $360 Billion on Unemployment, Welfare and Other related spending of this type for the poor and unemployed. That's $584 Billion a year because we have a bloated population and labor market comprised of more people than sustainable jobs. Half of the households drawing these benefits are working people, but their wages are too low to sustain themselves and their families. California spends $10.5 Billion a year of its state treasury on the education, healthcare and incarcerations of illegal aliens. California has a $15 Billion budget shortfall this year. 2/3 of that problem is the direct cost of illegal immigration supporting people at taxpayer's expense who aren't even supposed to be in California, because they aren't even supposed to be in the United States. Take that problem in California and apply it to every state in our nation dealing with the same illegal immigration issue and this problem is destroying the financial security of every state in our country.

Stop illegal immigration, enforce US immigration, US labor and US Civil Rights laws to the letter, pass the Save Act to make e-verify mandatory, and fund the 287 (g) program at whatever level is necessary to remove every illegal alien from our population and labor market. This must be done, it must be done immediately, it must be done without exception, it must done with due process of law, and it must be done right.

www.alipac.us

2. Congress must pass the FairTax legislation, House Bill 25 in the US House of Representatives and Senate Bill 1025 in the US Senate. This legislation repeals the 66,000 pages of Infernal Revenue Code nonsense and replaces it with a simple 10 page law that replaces all federal income, social security, capital gains, dividend, interest, gift and estate taxes on individuals and businesses with a national retail sales tax on new products and services collected at the final point of sale. Retail sellers collect the tax, are paid a fee for the service, they forward the money on their regular state sales tax report form with 1 new line added to collect the federal FairTax and send it to the states, who monitor and supervise the program, are paid a fee for the service and then forward the money to the federal government. The law also has a Rebate provision so that anyone who is a US Citizen or Legal Resident may sign-up regardless of income, based on the number of adults and children in the household and receive a monthly rebate of what they spent or would have spent on FairTax for essentials according to a pre-determined chart.

www.fairtax.org

For a quick and easy view of the chart, go here and scroll down to the "Monthly Tax Rebate", find your status of household and you can see what your family rebate is monthly and annually:

http://en.wikipedia.org/wiki/FairTax

The FairTax frees up our money supply and capital markets. This increases the retained earnings of our businesses and families and the expendable income and assets of our workers and families. The FairTax also injects new capital into our markets and economy because businesses now have all their earnings to work with. The FairTax reduces poverty and all costs associated with poverty because people now have all their incomes to live on and reduces unemployment because businesses pay no tax at all which allows all our businesses to retain all their earnings which means the industrial, technology and innovation sectors of our economy will have all their hard earned retained earnings and capital gains to reinvest in new plant, equipment and payrolls to upgrade and expand their operations, which is how we create new jobs in the United States.

This means we'll be building new factories for American Workers instead of new houses for illegal aliens. This means we'll have a foundation with roots and a base to support and sustain our economy and its legal participants. This also means that corporations and businesses can once again return their focus to their business instead of wasting their time and our economy lobbying our Virtual Representatives in the US Congress for special favors. At least 80% of all corporate lobbyists are in DC because of business tax related issues, lobbying for a new rate, an exemption, a loop-hole, a credit or some other tax "code" to save their companies, shareholders and employees from tax burdens.

This also means that the American People once again control their government, because now they control the purse strings with every new product or service purchase decision they make. Happy Citizens spend and when they spend on new products and services, the government fares well. Unhappy Citizens stay home as the subject of this thread indicates, they dig in, they save, invest, reduce debt and hoard. Every month, under the FairTax, collections will be reported, and every American will know how we're doing economically as will every Governor, every Mayor, every Sheriff, every state legislator, every member of the US Congress, and last but not necessarily the least, every member of the Executive Branch including the White House.

Pass the FairTax, and Pass It Now. This legislation has extraordinary support in the US Congress with 73 Official Co-Sponsors and many other supporters who are not Sponsors. 72 of these are Republicans, and 1 is a Democrat. Wake Up Democrats ... it's way past-time for you to study this bill and join your fellow Americans who have signed up to officially Co-Sponsor this legislation that will not only save our economy but improve it permanently in every way on every level.

3. Repeal Free Trade Agreements and replace them with a protected trade law. Tell anyone promoting "Free Trade" on the basis that it is "Good for America" to shut-up and go to this link to find out how Not Good for America, free trade has been for the United States.

http://www.census.gov/foreign-trade/balance/index.html

Start with Mexico and Canada under NAFTA.

In 1994, the US had a trade surplus with Mexico of $1.349 Billion. In 2007, the US had a trade deficit with Mexico of -$74.621 Billion.

In 1994, the US had a trade deficit of -$13.947 Billion. In 2007, the US had a trade deficit with Canada of -$68.168 Billion.

Then look at China.

In 1994, the US had a trade deficit with China of -$29.505 Billion. In 2007, the US had a trade deficit with China of -$265.207 Billion.

In 2007, the US had a total worldwide trade deficit of -$711 Billion when the US needs a $200 to $300 Billion worldwide surplus. 3 countries, Canada, Mexico and China represented 57% of this foreign trade imbalance.

A -$711 Billion annual trade deficit means $711 Billion in US Dollars exited the US money supply and did so permanently, never to return. It is the epitome of bleeding the US Economy to death through financial bankruptcy.

If you have something of value, you must protect it. Otherwise, you will lose it. If you have a valuable diamond ring, do you store it in the trash cart and just hope no one will steal it from you on trash day? No, you put it in a safe place, wear it and guard it yourself, or you hide it and by doing so, you protect your valuable asset. If the US doesn't protect its economy, markets, workers, technology, industries and businesses, the American People will not only lose our economy, money supply and livelihoods, we will lose our government and nation and the blessings of liberty both were created by the US Constitution to secure for the people of the United States.

4. Congress must end the War on Drugs and legalize and regulate this drug trade. For many, this will be controversial and disturbing, but Americans have to face up to some important facts about the War on Drugs starting and ending with, it failed. The US spends $70 Billion a year on the war on drugs to enforce the Controlled Substances Act which for all practical purposes is a prohibition of all recreational drugs. The industry grows every year, sucks over $400 Billion a year out of our legal economy into an illegal criminal violent foreign controlled underworld that then sucks it out of our country and money supply, never to be seen again.

Last year the number one pharmaceutical sold in the United States was highly addiction-for-life anti-depressants surpassing for the first time, medications for high blood pressure and arthritis.

In 1913, drugs were legal and you could buy heroin at the drug store. In 1913, 2% of the US population was addicted to drugs. Today, 2% of the US population is addicted to drugs. Soon to be 100 years and there has been no change in the drug-addiction rates. In 1913, no was murdered over drugs, no one's life was ruined by drug arrests, no family was broken apart because one of the adults was incarcerated for drug use, no pharmacist peddled their products on streets corners, alleys, parks or school grounds with an 757 in their jacket or an assault rifle on their shoulder, no SWAT team invaded homes killing the occupants "looking for marijuana growing in the home."

Today, there are over 800,000 Americans behind bars for non-violent drug charges, most of them related to marijuana. In the past 20 years, we've paid law enforcement, attorneys, courts, judges and prisons to process 31 million drug arrests with no change in the addiction rates from what they were nearly a century ago.

There is no question that we must regulate this industry, but we must regulate it under a civil code, not a criminal code with rare exception, and we must put this industry under the control of the American People instead of criminal violent illegal foreign drug cartels.

We must tax the enterprises under the FairTax and use part of those revenues to better educate the American People on the risk of use and the consequences of using these drugs so that they use them as informed people. We also need to use part of the revenues the purchasers of the products pay in FairTax on the transactions to provide Rehabilitation Without Stigma to those who want or need it so they are on a path to a cure instead of a road back to crime.

We need to respect someone's desire or need for these drugs, ensure through legalization, regulation, education and rehabilitation that they can purchase legally without threat or harm to their person, freedoms or livelihoods these drugs grown or manufactured here under strict regulation and monitoring so they are as safe as such can be and then regulate and control the distribution and sale thereby controlling through normal relationships between government, enterprise and the people the quality and quantity sold to the public.

This means we shut down the foreign cartels operating in our country. This means we stop the magnet for illegal drug smuggling into the United States. This means we stop illegal aliens running these drug ventures in every crook and cranny of America. This means we stop wasting money on the arrest, prosecution and incarceration of US Citizens caught smoking a joint while giving an illegal alien drug smuggler caught with 800 pounds of marijuana immunity to testify against US Border Patrol Agents just doing their job. This means instead of exporting $400 Billion a year of US cash, we'll keep this money supply in our country and tax it generating new revenue for the government to the tune of $92 Billion a year which together with saving $70 Billion a year in the failed War on Drugs, the government will have another $162 Billion to spend on services for the American People like building better levees and repairing and replacing our bridges and/or pay down this atrocious national debt starting with the foreign debt.

This also frees up law enforcement officers to enforce US immigration laws under the 287 (g) program so they can arrest and deport illegal aliens destroying our country instead of US citizens getting high in their living rooms.

For more information, visit this website of Law Enforcement Against Prohibition and be sure to watch the video that's available on the right hand side of the home page:

www.leap.cc

There are 2 bills presently in the US Congress that address part of this legalization. One is Barney Frank's bill that decriminalizes marijuana in small quantities,100 grams or less, and another one is Ron Paul's bill that legalizes hemp.

Frank's bill is HB 5843 and here's a link:

http://www.house.gov/frank/marijuana041708.html

Marijuana represents between 60 to 70 percent of the illegal drug trade. To legalize this plant would be a great start to ending the war on drugs.

Paul's bill is HB 1009 and here's a link about removing hemp from the Controlled Substances Act. Hemp has been illegal because marijuana has been illegal. Hemp is a wonderful product that can be used to make needed products like textiles, fabrics and paper products which are 100% recyclable when wood-based paper is less than 70%. There is even a bio-fuel use from hemp.

http://www.votehemp.com/state.html

These are 4 simple actions of Congress that will turn our country off the road of depression and disaster onto a new and permanent highway of peace, prosperity, liberty and happiness and do so swiftly.

go get'em Judy

I hope Congress will read the plan and take heed to act and act now. There is a point of no return which we are fast approaching so the urgency of this needed action can not be stressed enough.