Tax Rebates to Neediest Won't Stimulate Economy

Of course, bipartisanship unto itself is not an inherent good. Bad legislation doesn't get any better simply because it's supported by both political parties. The accomplishment now claimed by both Democrats and Republicans is that of two thieves congratulating their own cleverness as they clean out your safe deposit box.

Indeed, the much-heralded stimulus plan is a charade, designed not to boost the economy but the dismal favorability ratings of both the president and Congress. Based on bad economics and immoral philosophy, it will inevitably prolong the economic malaise its backers hope to avert.

At its heart, the stimulus package is a redistribution of wealth, taking money from those who've earned it and giving it to those who haven't on a massive scale that would make Robin Hood blush. Starting this spring, just a few months before November's presidential election, more than 130 million households will start receiving checks. The rebates of up to $600 for individual taxpayers ($1,200 for couples) would phase out for those with incomes above $75,000 ($150,000 for couples), meaning that those who pay the most taxes get the smallest rebates and the wealthiest taxpayers receive nothing at all.

Bizarrely, the bill gives tax rebates to millions of people who don't pay income tax, a group including low-income seniors living on Social Security and military veterans on disability. Most people will also receive a $300 check for each dependent child.

"We believe the stimulus, the way it is targeted, will put money into the hands of those who will spend it immediately, injecting demand into the economy and therefore creating jobs," said House Speaker Nancy Pelosi (D., Calif.).

Pelosi's estimate and her economics, however, are deeply flawed. First off, an Associated Press-Ipsos poll found that only 19% of those surveyed said they planned to spend their rebate checks. Rather, the majority planned to pay off bills, meaning that the tremendous demand expected to be created by encouraging citizens to spend money they haven't earned won't likely materialize at all.

Moreover, Pelosi fails to acknowledge that wealth isn't built by stimulating consumption, but by incentivizing production. After all, it's the producers, not the consumers, who power the economy. Wealth isn't created by those who consume, but those who produce, a process that requires long-range planning and a profit motive, neither of which the stimulus does anything to address.