Members of Congress and President elect Obama are starting to talk about a second stimulus package.  Their thought is to get cash in the hands of Americans so they’ll spend the money and jump-start the economy.

While this sounds good in nature, it’s actually a pretty dumb idea.  Let’s forget the fact that we tried this earlier in the year, and we’re still in a worse situation now than we were without the stimulus check (read as: it didn’t work). 

The main reason a stimulus check is a horrible idea is mainly the costs behind pulling together such an event.  There are thousands of man-hours (or women hours) that are pooled together by the government to pull this off.  They have to go through tax databases, establish a procedure for the rebate process, match rebates to eligible people (or verify that the person is eligible), perform quality control over the process, and mail out/direct deposit the checks.  I can’t find actual figures for this, but I’d image there’s a whole lot of overhead that’s coming into this equation.

A very simple cost to quantify is the postage for this process. Based on 2006 tax filers/families that were notified of the last stimulus package via letter, there were 160 million people/families that received information regarding the stimulus package via USPS.  At today’s rate of 42 cents per letter, this cost comes in just over $67 million dollars.  That’s $67 million gone in 1 letter.  Not to mention the mailing of the checks or second notices, meaning we could easily spend somewhere in the neighborhood of $130 million in postage alone.  Not including the paper/time/ink associated with these letters.

But a stimulus check makes people feel good!  It makes them feel like the government’s on their side!  It actually makes our government look extremely fiscally irresponsible.  Why are we wasting this much money?  For everyone to get around $600…an amount that really doesn’t help anyone that much, except to remind them how f*!ked up their financial situation really is!

The answer?  Tax cuts.  I know what you’re saying…of course the fiscally-conservative guy that tends to lean Republican is going to talk about tax cuts.  But it just makes sense!  You already have a process in place to notify people, process forms, and cut checks, if necessary.  Why not just add this into that scenario, and reduce everyone’s taxes with a refundable tax credit of this amount?  That way you’re not creating a huge amount of overhead for no reason, and everyone can benefit.  Saving $600 on your taxes, and not having to pay the government $600 on April 15th is the same economically as paying them $600 on April 15th and then getting $600 back on June 1st!  Heck, it’s even better!  Because the governmental machine doesn’t have to collect all of the money, and then re-distribute what it has.  And, it keeps the government from potentially having to borrow funds to cover the additional overhead and payments to tax payers.

Why does this not make sense to Congress.  Have we reached a point where we can’t do anything that makes sense fiscally if it doesn’t come with the instant gratification of receiving a check from someone?  Must we always enact government action that makes people *think* they’re getting something for nothing from the government so our representatives can feel all warm and fuzzy with their constituents’ approval?  Are we just trying to buy people’s approval without any regard to the idiotic fiscal policies of Washington (Republicans and Democrats alike)?

Am I off my rocker here?

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