Instead of the rebate, check-in-the-mail portion of the anti-recession stimulus package President Bush and Congress are likely to give us, let’s just get a bunch of crop dusters, load ’em up with cash and have them fly across the cities and suburbs of America. Wherever people gather below with outstretched hands, the planes can zoom low, letting bills of varied denominations float their merry way earthward.
Of course, this oft-repeated spectacle wouldn’t do much of anything to avert a severe economic downturn if one is truly headed our way, but neither will a one-time-only gift of hundreds of dollars per household. At least dusting with dollars would be a boon for any unemployed pilots out there.
The proposed rebate, likely to be a significant piece of Bush’s $145 billion plan, has another intended beneficiary: Both Republican and Democratic members of Congress can pretend to be doing something constructive, even if that requires they ignore the late Milton Friedman’s wisdom and scads of empirical evidence.
As the economist Bruce Bartlett discussed in a recent Wall Street Journal article, the Nobel Prize-winning Friedman determined that most people won’t make extensive, economy-reviving purchases on the basis of a single windfall. They are smart enough to know that their spending habits should be based on something lasting — a permanent tax cut or a wage increase, for instance — and data on rebates in 1975 and 2001 bear him out.
Bartlett notes that studies of the 1975 rebate show it didn’t affect spending much, and a New York Times article tells of a University of Michigan study showing only 22 percent of recipients spent “much” of their 2001 rebates.
To get to a plan that would work, you’d have to institute something like the proposals of Republican presidential candidate Mitt Romney: An end of payroll taxes for employees over 65, a smaller rate for those in the income tax’s lowest bracket, and abolition of capital gains taxes for people with annual incomes under $200,000. There’s more, such as corporate tax reductions similar to those sensibly sought by another Republican candidate, Rudolph Giuliani.
While enactment of Romney’s $233 billion wish list would increase the need for quick, decisive Social Security restructuring and eventual steep reductions in federal expenditures, it could soften a recessionary blow while furthering the goal of prolonged and robust growth.
Even when you throw in another likely part that would boost deductions for businesses buying equipment, the Bush plan would likely soften nothing. Nor would various Democratic plans, as typified by the suggestions of Hillary Clinton.
The Democratic presidential candidate sees rescue from the moment’s worries mainly consisting of programs for the poor, as if weathering a storm is the same as lessening one. Her broad economic philosophy can be summed up as incessant, in-your-face, envy-mongering interventionism, which would fail for the same reasons such intrusions in the free market have always failed. Central planners cannot begin to know a fraction of what is necessary to do the job, as opposed to millions of consumers and businesses making decisions in accordance with the sacred principle of freedom, and simultaneously doing more to flatten poverty than any force in human history.
The best bet for the moment is a Romney-like approach, along with making Bush’s 2003 tax cuts permanent. The tax cuts, in fact, raised the portion of taxes paid by the richest among us, according to a recent analysis that Clinton really ought to read.
As for rebates, skip them. This temporary measure won’t do even temporary good.
