Friday, February 13, 2009

All I got was this lousy $400

The Republicans, and seven Democrats, were right to reject the lousy Obama administration stimulus bill today. It will be a total dud, and six months from now you'll see the jobless rate reaching 10%, while stories of rich bankers and Government workers will fill the NYTimes. Maybe even Paul Krugman will declare it a failure.

The stimulus bill is awful because it does not help households save. The US household has gone from an unsustainable level of negative saving to a sustainable level of positive saving, as we all knew it eventually would, and this is only triggering the Apocalypse because academic economists have no idea how money works. If they did, they would be increasing the Federal Deficit to fund this increased demand for private savings, through a payroll tax holiday. Instead they are doing nothing except transferring wealth to bankers and Government workers, and making households cut back on transaction, forcing saving the old fashioned way -- unemployment.

The Finance Buff put it best:
- Making Work Pay: For 2009 and 2010, $400 per person tax credit for AGI under $75,000; phased out to $95,000 (double everything for married filing jointly).
- One-time $250 payment to Social Security and other fixed income recipients.
You got that. $400 for some households. And $250 if you're living on SS. Note, the $400 used to be $500, but it got cut.

These numbers are piddling. They need to be multiplied by about 15 before they'll make a dent in the average household balance sheet.

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