Tax rebates: short-term relief for long-term problem


The tax rebates are in the mail. Or they will be soon. When people will get them will depend upon whether they get a direct deposit to their account or they will get a check in the mail. The mailed checks will come out in waves with arrival time dependent upon the last number of one’s social security number. Regardless, it is really questionable that they will serve the purpose for which they are intended.

Bush pushed the rebates hard as a way to head off the worsening economy. Given that most people can use some spare cash, it would have been a foolish move by the Democratic Congress to deny Bush this bill. Still, the expectation that the extra $600 per person will really turn the economy around seems to be asking for something that cannot possibly be delivered.

It also is clear that Bush is still truly unaware what the average person faces. To say that this $600 will help citizens meet their fuel and food bills shows a woeful lack of understanding as to how little this amount of money will help.

If one just does some basic figuring, it is easy to see that the cash will not go far. With gas prices about $4 per gallon and using a 15-gallon tank for an average car, that means $60 per fill up. That is only 10 tanksful. For most people, that is about two months worth of gas. And, that means no extra for anything else like food.

While every little bit helps, it does nothing to help the long-term problem. What happens after the two months of gas money is gone? No other money is coming in the mail. People who were having problems before are going to continue to have problems.

It would have been better to have done something to help the thousands of people who have been harmed by the mortgage crisis. Instead, Bush pushed for relief for the companies who made it possible for all these people to get into this situation. He made it clear he would veto any legislation that helped the people. Once again, corporate America is taken care of before America.

The rebate also only feeds into a fundamental problem of our economy: we are now a consumer-based society. Whereas our economy used to be based on the production of goods, it is now based on the consumption of goods. This trend is something that the Republicans and corporate America have been pushing for a long time. And, we have bought into it (bad pun somewhat intended).

Now, if we do not have the spare cash to buy items, then the house of cards starts to fall as companies have become dependent upon the purchasing power of the American public. And so here we sit with an economy going south as people are feeling the pinch of high gas prices and concomitant high food prices, thus leaving little to consume other goods. And, it is those other items, the disposable cash items, which need to be purchased to get the economy back on its feet – not the necessities.

The other downside to this influx of cash is that it is the government version of a payday loan. It is money that one is to get in the future, but is getting now. So, what happens when that “bill” comes due? It will mean scrounging for that $600 then, not now. It is why no responsible person or money manager ever advocates payday loans. If our government officials really had the public welfare at heart, this would not be pushed.

Of course, the more cynical among us will see this as nothing more than a pre-election season ploy to make things look good so folks will feel kindly to those who gave them the money and thus re-elect them. Given the short memory of the public, it is an understandable position.

The tax rebate is really a pointless exercise in the greater scheme of things. It will provide some very short-term relief for a long-term problem. Cessation of the war in Iraq ($12 billion/month), reigning in of corporate welfare (tax breaks and subsidies), requiring payment of back corporate taxes ($8 billion and counting) are all things that would do more to help our economy than for each one of us to get $600 from our 2009 taxes. But, that would require us to take the long view, something we rarely do anymore.

Val Torrens appears Wednesdays in the CK Reporter.

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