A Nation Drowning in Debt

The original Atlantic article. Ouch. By the way, the Atlantic has a great new "business" section/blog. A nice section entitled "what we're reading." I read this article opposing the stimulus plan as written from this section. He makes a good point regarding tax cuts:

The plan is to give a tax cut of $500 a year for two years to each employed person. That's not a good way to increase consumer spending. Experience shows that the money from such temporary, lump-sum tax cuts is largely saved or used to pay down debt. Only about 15 percent of last year's tax rebates led to additional spending.

That's exactly what I did with my George Bush stimulus payment from last year. The writers suggests another way to bump consumer spending:

Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables, analogous to the investment tax credit for businesses? Or a temporary tax credit for home improvements? In that way, the same total tax reduction could produce much more spending and employment.

Well, I'm not in the bracket to be improving my home or buying a new car at the moment. But I tell you what I would buy if given some incentive: a new bike. I'm annoyed with my cheap ass commuter bike. I spent $250 and I should of spent $500. I guess my problem is complicated by not having a good space, ie garage to keep the bike. The bike's home is outdoors, so maybe it's better to have a bike I semi-hate to a bike I love but am constantly worried about getting ruined or stolen. In any case, a bike tax credit would also benefit the environment...in theory.

I do wonder about this proposal for increasing consumer spending. Won't firms simply up their prices to try and take advantage of the tax credit given to consumers? And can't they stimulate purchases by just putting consumer items on sale?

Anyhow, on NPR this morning they interviewed a women talking about taking a "spy class" and she said (paraphrase) "as someone who still has a job, I feel a sense of responsibility to spend money and keep money flowing into the economy." Which as far as I could tell, was a justification for her to go shopping...which, by the way, I don't necessarily disagree with.