The Fourth Pillar of the 'New' Economy: 'Spend all you can.'

April 30, 2008

The Fourth Pillar of the 'New' Economy: 'Spend all you can.'

In early February President Bush signed into law a $150 billion dollar package of tax rebates touted as a "stimulus" for the flagging national economy. The purpose of the plan, which President Bush has called "a booster shot for our economy," is to quickly inject some money into the economy and spur consumer spending.

The eighteenth-century theologian and pastor John Wesley once preached that we should "earn all you can, save all you can, and give all you can." Productivity, frugality, and generosity are the core moral virtues that have animated prosperous and free economies in the West for centuries. But now the federal government seemingly wants to add a fourth and conflicting principle to these traditional values: "Spend all you can."

With the first checks going out in May, the speed of the federal action is a relative thing; the nation's capital must be one of the few places where "immediate" action means something happening three or four months later. Individual taxpayers stand to receive about $600 each, with parents and guardians of dependent minors slated to receive another $300 per child.

Even so, it's unclear what effect the stimulus package will have on the economy in the short term. The $150 billion level is the minimum that many economists thought would be necessary for a rebate action to have any discernible effect on an economy as huge as America's $13 trillion annual GDP.

Other experts question whether such a move will be too little or too late to have the desired economic effect. We might also question the wisdom of such a package in the face of record budgetary deficits in federal spending, and indeed whether the average taxpayer should be taking economic advice from a government that has a debt level quickly approaching $10 trillion.

But any national or global economic perspective must be appropriately linked to the behavior of individual consumers, families, and mediating institutions, whose activity forms the aggregate for higher-level abstraction. So it bears asking what sort of effect the stimulus package will have on the average American taxpaying household.

For some, no doubt, a rebate at the levels outlined above will amount to some financial "gravy." The funds will be nice to have but not indispensible for a healthy and prosperous life. These are the folks that are most likely to spend the money in accord with the government's intentions: on consumer retail items like electronics, travel, and tourism.

For other taxpayers, the dilemma posed by the tax rebate will not be which luxury to buy, but rather which bill to pay first. For a family who has significant medical bills or credit card debt, it does not make much sense to spend the money on superfluous retail goods.

The important thing for taxpayers and families to consider in their decisions about spending this money is not what the government tells us to do with it. Instead, we should think about what makes the best sense for our particular situation.

This money is, after all, the taxpayers' own in the first place. In sending back tax "rebates," the government is not giving cash away but simply returning to taxpaying citizens what is and should be our own money. When the rebate checks hit your bank account, the government ceases to have any claim as to how to spend those funds.

And rightly so. Taxpayers should use this rebate money as they see fit, since they are the ones most familiar with their own situations and their own needs. Consider giving part of the money to charity or saving, paying off debt or investing. And if it makes sense for you and your situation, you should feel free to buy that hi-def TV if you so desire.

But you certainly should not feel obligated to do so as if mere consumption is a civic responsibility.

As a free and responsible people, Americans should be taking our cues about financial stewardship not from Congressional fiat or presidential directive, but from our own sovereignty as creative, thrifty, and charitable citizens.

Jordan J. Ballor is associate editor at the Acton Institute for the Study of Religion & Liberty (www.acton.org) in Grand Rapids, Mich.

Comments

guillermo Contreras: memo1xusa@aol.com

Jordan J. Ballor, clearly stated that the "stimulus rebate" given to the public by the government It is their own Money back, collected by taxes, borrowed from investors in Bonds and securities,or from Foreign investors, or from printing funny Money, with no backing.
My question is, Why the Fed has the autority in lending people's Money to big banks and investing banks, and the real owner, the public only gets a hand out?
First of all,Money is a private property of the people, whether is in the hands of the Banks or the government, therefore, the Fed should defend the especulative and usurious scheems by the lending institutions, like Banks , Credit Card 's "loan sharks", Mortgage lenders and so for. instead of offering to this speculative institutions our Money at great discount. And we? what do get? bills, foreclusure notices and punishment to our credit records.
Finally, I think, the Federal government, since they call the shots, by controling the Money supply and the interest rates, inflation, etc. etc. They should be, the sole "Public Credit Institution" to lend our Money back to us, for peronal use , business or industrial use etc. and we, as good tax payers (IRS) we can also be a damn good loan payers, after all, our good credit record, will be also counted.
I guess not, we are not socialist, nor comunist nor christians. We are "Savage Capitalists"

Mike:

Regardless of how the 150 billions is being bestowed, it 's still gives way to the fact that this "plan" is only a band-aid on a gunshot wound. And I'm pretty sure that who ever has got the gun has not run out of bullets. In other words, this is going to get much worse before it gets better!

Ron Shultz:

I believe that most Pennsylvanians will use their stimulus checks to pay part of their property tax bills which should have been abolished thirty years ago.

Dawson Lodge: websetup2003@yahoo.com

Everybody is missing the point here. The 150 billion is a bailout of the banks, the government
doesn't give a damn about the people or the economy.
When this Alice-in-Wonderland idea was first cooked up,
the banks were folding. Since the checks go into the banks anyway, it was a way to restore
reserves to maintain their capital requirements. The minute they knew that congress would go along,
the banks were loaned the cash. Months ago.......
This allowed them time to unwind some of their highly leveraged "investments" (read "gambles")
Misdirection and camoflage is the name of the game. When will people start looking at reality and
quit paying attention to the propaganda?

Paul:

A few weeks ago, I had joked that the only entities that would be "stimulated"by the $600 give-back I would be recieving, would be GEICO and my electric company.
Today, I got my estimated electric bill for $285, and my car insurance renewal bill for $314 and change. If I`m lucky, I may wind up wih enough left over to buy a
newspaper!

Charles W. Baird: cwb1938@yahoo.com

The idea that consumption spending from a tax rebate can stimulate the economy is merely a Keynesian superstition. Money that is taken or borrowed from A and transferred to B cannot increase total spending. Where does the money in the rebate checks come from? It has to come from higer other taxes, or from government borrowing, or from the printing press. In the latter case the "stimulus" is to inflation. Or, it could (but in practice never does) come from reduced government spending on other things. In that case the reduced government spending offsets any increased spending on the part of the rebate recipients.

Acton Commentary