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Monday, January 12, 2009


This was an interesting article I read today about Obama's new trillion dollar *stimulus* plan.

I’m sure you have heard about President-Elect Barack’s Obama’s new push to pass a $770 billion to $1.3 trillion stimulus package. I couldn’t find a a comprehensive article about the details of the plan, but what’s being reported the most in the media are the tax cuts which make up about 40% of the package. Here they are, and here is why I think they are mostly nonsensical and probably would not do much to lift the economy.

1. $500 tax rebate per worker or $1000 tax rebate for families - I know that every bit of money helps, but is this really the best way to spend billions of dollars in stimulus money? $500 per person works out to be about $40 per month. I guess it’s good for a cable bill, but will $40 per month stop a family from going into foreclosure? Will $40 per month be enough to stop local shops from closing? Another thing is, didn’t we just have a round of stimulus like this from the Bush administration? That one was actually $600 per worker or $1200 per couple plus $300 per kid. Just look at how much that helped and you’ll see how much this one will help.

2. $3000 tax rebate for each job a business creates - This one has so many holes that it’s like a piece of moldy Swiss cheese. First of all, if a person lost a job at business A and then finds a job at business B, is business B really creating a job? It seems like that would be a net gain of 0 jobs to me. Additionally, some businesses are doing well and some are doing poorly. The ones that are doing poorly are very unlikely to hire someone just for the tax benefit because adding an employee is very expensive and it would only make sense to add an employee if the employee’s output of work can bring a profit. On the other hand, the businesses that are doing well may already be planning to hire people and they will get stronger due to the tax rebate, but they probably did not need that money to begin with and again this tax rebate would have been pointless. Another thing is that it’s unclear how long a company needs to keep an employee to claim this tax benefit and what type of employment it would be. If those details are not clear I can see shady businesses exploiting this by hiring some person part time for half a month and then claiming the credit for a profit. Anyway, I don’t think this tax stimulus will actually be an incentive for any logical business to add to their payrolls and I highly doubt that this will bring about a net gain in employment numbers.

3. Corporations get to use losses in 2008 against profits obtained 5 years prior - This particular item isn’t mentioned a lot on the big news sites probably because it’s just bizarre. I see this particular clause benefiting the giant financial firms the most because they have had the most significant losses in the last year, and they also had the biggest profits in the years prior. A lot of companies in other industries did not suffer as badly, and the good responsible companies that were still making a profit in 2008 will not get a boost. Again, there is no guarantee that the companies that receive this benefit will create jobs and expand the economy. In fact, I think in this economy only the strong companies that still have a profit are still hiring because they know that they can get discounted labor and they are in a good position to use the extra labor effectively. It is almost like Obama wants to punish the companies that had good management to make a profit despite difficulties by giving their tax dollars to those who may have been extremely irresponsible and I think it’s plain stupid.

Finally, there is a question that everyone should be asking “WHERE THE (insert your favorite expletive here) WILL ALL THIS MONEY COME FROM?” Oh that’s right, they will just add it to the national debt, and that will be paid by Americans for generations to come. I know that Obama’s plan isn’t finalized, but so far I haven’t heard a single good idea from him, yet.



Blogger Jennie said...

after reading news online today, it says Obama conceded on #2 the $3000 tax break/job.

Too hard to monitor, per CNN or Foxnews...whatever I was just reading.

1:08 PM  

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