James Clay Fuller

Things We're Not Supposed to Say

Tuesday, May 06, 2008

Economic stimulus or just another con job?

Most of us haven't yet received our tax rebates -- our shares of the bipartisan boondoggle designed to make us believe that Congress and the White House are doing something about the gawdawful economic mess they've created for us.

Same old, same old.

The money will come fairly soon, and I'll bet I can predict what you're going to do with your little piece of the action. And make no mistake; it is a little piece.

You will buy something you were going to buy anyway with some portion of the money -– less than a third of it in most cases. For me, it will be a new computer monitor to replace an elderly model that is fading quickly. Like me, you'll use the rest of it to pay down debt and/or to bolster your savings.

Several polling outfits did quick surveys after the panderers in Washington passed the bribe package for the inattentive cops on the street -– that's us -– and they all came up with the same answers for the majority of taxpayers. Those answers are as stated above.

Poorer folks, of course, get less than the rest of us, and the very poor get nothing, even though they are the ones who can be relied upon to spend whatever they get for the simple reason that they have no choice. They're trying to survive from day to day.

But this thing isn't about reviving the economy; it's about appearances and votes. Once the package got rolling, no American pol would dare to speak against it.

As an economic stimulus, folks, the rebate program is somewhat less effective than laying a length of worn out garden hose across a high-traffic road and calling it a speed bump.

The other pieces of the scam –- the ones the broadcasters and corporate newspapers have either ignored or barely mentioned -– are of no more use to the economy as a whole, but they please a select group of beneficiaries who mostly ain't you and me.

Here are some facts that you probably won't have seen in a newspaper or on television:

* This one made it into one news cycle in some places, but was given a pass by many nooz purveyors. It's relatively minor, but interesting: Remember that one-page letter you got from the IRS a couple of weeks ago? The one that told you in the language of a corporate public relations agent that you were going to get an “economic stimulus payment?”

That letter cost us, the taxpayers, $42 million.

* Newspapers and broadcasters keep telling us about how much we're going to get. They don't tell us what the charade costs the country as a whole. The total cost has been figured by a number of agencies, public and private. The degree of difference among them is almost nonexistent.

Some I've read say total cost will be $168 billion, some say $167 billion. That's before any “stimulus” benefits that will be claimed.

The Congressional Budget Office says the package will decrease federal revenues by a total of $114 billion this year, but projects that the stimulus payments to citizens will result in $80 billion in direct spending during this year and next.

Uh, yup. We're throwing out $114 billion in order to get people to spend $80 billion, much of which would be spent anyway. And that's if the estimate isn't overly optimistic, as I believe it is.

Of course, not much of that $80 billion, even if the money is spent, will revert to the U.S. government. The White House will say we have to cut more from health care programs for children and the elderly to make up the loss.

There are other factors at play in the so-called stimulus package that complicate the figuring, but over-all the Budget Office estimates, the package will increase federal budget deficits by $152 billion in 2008. It estimates that certain benefits from the package will reduce the size of increase in our budget deficit to $124 billion by 2018. Yeah, sure, you betcha, as we say in Minnesota.

* There are a few other numbers that don't seem to have been included in the Budget Office stats that I found, although I could be wrong about that; clear, complete and candid reporting on the situation is scarce to nonexistent.

Among the apparently missing numbers, as stated in another federal report, is the $767 million it is costing us just to administer the stimulus program.

That number includes the cost of moving staff around to get people in position to perform such tasks as answering telephone calls from taxpayers and other routine administrative jobs. It also includes an unspecified amount of lost revenue that will result because people whose job it is to track down unpaid taxes have been taken off tax law enforcement to do routine administrative work on the stimulus program.

* In a newsletter to constituents, Republican Congressman Vito Fossella of New York (Staten Island, and hold the jokes about how he might be connected; I thought of them, too) bragged to his high-roller supporters that one of the big benefits of the stimulus program is the part that gives substantial breaks on mortgages to people who buy costly homes in places such as his district.

If you're the sort whose home requires what the trade calls a jumbo loan, Fossella is correct. You probably didn't catch it on TV or your local newspaper, but the stimulus package includes a provision to increase mortgage loan limits in certain high-buck areas (such as Staten Island) -– on loans of between $417,000 and $729,500 –- and give “qualified buyers” in that price range an interest rate break of one full percentage point on loans issued under Fannie Mae and Freddie Mac programs.

Trying to buy a house, but need a loan of only, say, $90,000 or even $350,000? This stimulus is not for you.

* This one isn't for you, either, oh mighty consumer: It's the almost unreported piece of the package giving very large tax breaks to “small” businesses that invest in new equipment. The New York Times had one story back in mid-February, when the package was still under discussion in Congress, but I haven't seen anything in the corporate media since.

(I emphasize the “small,” by the way, because so far I have found no definition of that under the stimulus law, and the business world and government tend these days to define “small” as any business with annual revenues of less than several billion dollars a year.)

Now it is a fact that business –- some business –- investment in new equipment and property is good for the over-all economy. As with public infrastructure such as roads, bridges and natural gas lines, it's a lousy idea to let your plant and equipment deteriorate; you lose business in the long run, and the jobs you provide disappear when you fail.

And, yes, many businesses must update periodically to remain competitive.

But I'm skeptical about this package, folks. The business investment stimulus in the package gives those “small” businesses big tax breaks for investing in equipment -– 50 percent additional deduction on any new equipment purchased. It also greatly extends the amount small businesses can deduct from annual income, up to a total of $800,000 per business.

Several little smells set my BS detector twitching.

Small business, real small business, as in locally owned restaurants, shops, small trucking companies, small specialty manufacturers and all the rest, are so far doing better than the rest of the economy. I've seen no evidence, however, that there's a widespread need for new equipment.

Also, with the public finally backing off unnecessary spending, it would seem the wrong time for most small businesses to put substantial amounts of money into new equipment, tax breaks or no. Even with those tax breaks, you have to pay substantial sums for new equipment, and if business is dragging you don't get much use from that equipment. It works if you need to replace something worn out, of course, but it's unlikely that a majority of small businesses across the country will suddenly have to replace substantial pieces of their equipment.

So invest to expand? In a recession? Only if you have so much money you can afford to dump big sums into equipment you don't need now but might want some day. In my experience, few small businesses have that kind of capital lying around unused.

Nope. The phony stimulus will get lots of sycophantic praise from the myriad trade associations and Chambers of Commerce and such, and so it will do the politicians -– especially Republicans -– some good, but the value to the economy is suspect. In fact, it may even do some businesses some harm by leading less than clear thinking small business owners to spend money they can't afford.

So somebody is bound to ask: What would you do?

Well, folks, a stimulus package could be useful, but it would have to be totally different from the one we have here.

One thing that actually would help revive our sicker-than-you-think economy is job creation. We've been losing jobs steadily, and all signs point to that continuing if the pols go on doing what they're doing.

What we need, what this country badly needs, is government incentives and direct government spending ala Franklin Roosevelt's programs to both create jobs and rebuild the infrastructure that is falling quickly to third-world levels under the continuing rule of “no new taxes” Republicans and Republicrats.

And let's not even get started on the ridiculous McCain/Clinton idea of a "vacation" from the federal gasoline tax...