Tuesday, April 1, 2008

Economic Bone-Us

By now everyone has received their special little notice in the mail, the one that our government spent $42 Million on so they could remind everyone to expect a check in the mail in a couple of months.

Of course, everyone I know who has received them in the mail has had the same response, which is bewilderment as to why they actually needed to be sent out in the first place. It is even twice as baffling when you consider the amount of ridicule they received when they did the same thing with Bush’s first round of pointless tax rebate checks. So why do it?

This past Friday, U.S. Treasury Secretary Henry Paulson claimed that the Economic Stimulus Checks set to ship out this spring would help to create over 600,000 new jobs. This seemed like an unusual claim to me, but the article I read it in failed to elaborate on exactly how this was supposed to happen.

Curious, I scoured five or six other reputable news sites until I finally found an article that explained this claim. The explanation was as scary as I thought.

I was hoping that the quote was merely misleading, and that Paulson meant that some other part of the stimulus package involved creating new jobs. Unfortunately, this wasn’t the case.

This claim (buried in the Friday Dead Zone News Cycle) is based on the theory that once these checks ranging from $600 to $1200 are sent out, every tax-paying citizen is going to rush out and spend that money on iPods and Nikes. Because of this sudden spike in frivolous spending, retailers and manufacturers will need to hire additional workers to handle the increase in demand.

This is economic theory in its purest and scariest form. I can easily compare this to the claim that if every person in China jumped up and down at the exactly the same moment, the resulting inertia would knock the Earth out of orbit. Mathematically the equations are sound, but both are based on such vast improbabilities that it shouldn’t be taken seriously.

The biggest problem with this claim is that it hinges on the hope that average citizens in the throes of a recession and mounting high-interest debt aren’t going to spend the extra money on food (the cost of which has been steadily increasing at twice the rate of inflation), fuel (which is still rising based solely on stock market investing), or credit card debt (because even though the fed keeps cutting short-term interest rates, credit card companies keep raising their rates for no reason whatsoever).

Also, assuming that new jobs actually are created, the hope is that companies hire full-time employees with full benefits, as opposed to part-time labor that they can fire once things slow down again (which they obviously will). The odds of this are slim to none, considering that many retailers are even storing leftover holiday merchandise instead of selling it at clearance prices in preparation of even more dismal sales to come.

So here’s where the slight-of-hand comes into play. The pointless check notifications aren’t so useless when you consider that the hope is people will actually spend the check before they receive it. Then between the pre-spenders and those that cash the check first, the ones that actually do spend their money on non-essentials will help to create a third quarter report that will reflect an increase in consumer confidence.

This temporary increase will most likely be announced just in time for the November Presidential Election, no doubt, and be used to demonstrate that the current administration’s economic stimulus strategy is working.

If it manages to swing the vote for the Republicans, then it was a success. If the Democrats manage to take the White House, then the eventual drop in spending during the fourth quarter will pointed to as the fault of the new administration, and it will be a success. It’s a win-win situation for everyone but the tax-payers being used and abused for more behind-the-scenes power-plays.

So as you are spending your American Economic Stimulus Package Checks on Arab Oil or Japanese Technology Imports, and paying the part-time/no-benefits/three-job/minimum-wage/paycheck-to-paycheck cashier for your purchase, wipe that tear from your eye and thank the heavens above that the people running this great and glorious country are looking out for your best interests.

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