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Do We Really Need a Tax Rebate?

April 8th, 2008

tax-rebate.jpgWith the recent discussion in the media about tax rebates and economic stimulus plans, some people have questioned whether the current proposals will actually provide any significant improvement in our overall economy. This article by John Cassidy argues that the current tax rebate plan may not make much of a difference and suggests an alternative method for stimulating economic activity.

As a standard disclaimer, I should point out here that I do not necessarily endorse the opinions or suggestions of this author personally. If you disagree with the article’s content, you are free to give your rebuttal in the comment section. Better yet, you can submit your own ideas as a separate article through the contact page and have it published right here at Karlonia.com! Doing so will allow you to have your say in the spicy realm of political free speech and can even earn you a free link back to your site if you have one.


It appears our economy is slowing down. Recent trends of consumer spending indicate we may be heading into a recession. In an attempt to prevent this, Congress and the President have agreed to give all of us a tax rebate. The idea is if we get an extra $600 we’ll go back to maxing out our credit cards, which will fuel an economic boom to the delight of Wall Street.

While I’m happy to get an extra $600 I do have a few concerns. There is this deficit thing that has grown so much the last few years. With the tax rebate plan and additional military spending, the deficit is expected to be over $400 billion. Such a huge deficit fuels inflation, puts us further in debt to foreign powers, and keeps us from responding to national problems. Think health care, education, collapsing bridges.

Plus, a measly $600 per taxpayer probably will not do much to prevent a recession anyway. For most people it will amount to a single monthly payment on their credit card debt.

There is a much better way to prevent a recession and it wouldn’t cost the Federal Government a cent. It’s time for trickle-down economics to be made to work. As President Bush has often pointed out, our economy has been growing strongly the last few years. The trouble is that growth has gone exclusively to the wealthy. The rest of us, in the middle class, have seen our wages stagnate or even slip backward. Higher food, medical and fuel costs have further eaten into our disposable income.

For a while we maintained our lifestyles by borrowing money. We’ve run up credit card balances, taken equity out of our homes, or both. Last year, our kids enjoyed another nice Christmas, but we parents woke up on New Year’s Day and realized that we were in financial trouble. We’re paying over 19 percent interest on those credit cards, and the value of our home has dropped so it’s now worth less than what we owe on it.

The only reasonable way for us to respond to this crisis is to tighten our belts and stop spending. No more big-ticket items: drive the old car for a couple more years, get along with the old appliances, eat out less, spend our vacation right here at home. We will have to practice this personal austerity for a couple of years, until we can pay down some of this debt!

But there is a way we can avoid this recession — trickle-down economics. It is time for the wealthy - which have done very, very well during the Bush administration - to start letting some of their huge windfall trickle down to the rest of us. Every employer in America should immediately raise every employee’s wages by five percent. In addition they should increase the size of their work force by an additional five percent. That would prevent a recession. A five percent pay hike for me would make a big difference in my paycheck. I’ve been getting along for the last seven years on one-to-two percent increases, and all of that has been eaten up by the jumps in my health insurance premiums. Give me a five percent increase and I’ll have some confidence in the economy. I’ll pay down my debt AND continue to spend a little. Multiply my extra spending by the millions of other middle class workers and we have an economic boom.

As we spend more, businesses will make more profits and the wealthy will see all their investment come back to them and then some. As Harry Truman once said: “Let it percolate up from the bottom!” For years the Republicans have been telling us that when taxes are cut, more revenue will come in, because it boosts the economy, generating more tax money. Won’t the same be true in the private sector? Won’t giving us all a big pay raise lead to generating more profit? Because, let’s face it, very little has trickled down for the last seven years.



2 Responses to “Do We Really Need a Tax Rebate?”

  1. comment number 1 by: Debt Free Revolution

    This idea sounds great economically, but I just don’t see it flying politically. Such a shame, too…it would probably work!

  2. comment number 2 by: Ireland5

    You mention, “Plus, a measly $600 per taxpayer probably will not do much to prevent a recession anyway.”

    What about the $13 per week - $400 - under the current administration? Of course, surely, all the pork barrel money will help the economy, right? What a plan….what country do we live in???

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