I’m not na?ve. I understand the current political climate. But let’s see the stimulus package for what it is; a political gift, not any kind of “bailout.” Art Laffer applies the curve he developed to the politicians’ plan, which he deconstructs in yesterday’s Wall Street Journal:
The proposed rebate of about $600 per man, woman and child is transferred to people based upon some characteristic other than work effort. In fact, if you’ve worked too hard and earned too much, you won’t get a rebate. So in some instances the rebate actually requires the absence of work effort. Now it’s true that some of the people receiving the rebate may also be workers, but working is not the reason each person receives the rebate; it’s simply because he or she is a human being. Thus rebate recipients are given command over real resources for doing something other than working.
If the resources come from workers and producers who thereby receive less for their work than they otherwise would have received, won’t they in turn spend less? Of course they’ll spend less, and the people who now supply them with less will also spend less, and so on down the line.
It’s not rocket science. Our politicians either haven’t had this concept explained to them, or they have and are advocating the stimulus package anyway. And we wonder why Americans are reaching new heights of cynicism. Read the whole article at www.wsj.com.