Einstein, Economy and Insanity - The effects of the economic Stimulus Act

“Congress and the president recently rolled out a $150 billion economic stimulus package. However it is heralded by politicians, in truth it is unlikely to have any significant effect on the economy. The only significant effect it might have is garnering a few votes come November.” (ERICK S. CREACH (an attorney with Van Matre, Harrison, Volkert, & Hollis.,) Tuesday, February 26, 2008, Columbia Daily Tribune)

Everyone loves free money, so those citizens who opposed the “rebate” were initially discredited as “being ignorant of the problems with the economy” and accused of wanting to keep people from getting “their money.” However, since a month has passed since the signing of the economic stimulus package, let’s examine the effects (or lack thereof) of this stimulus bill.

What was the stimulus package supposed to do? Most people would say that it was supposed to help the lagging economy. However, let’s examine a quote by Economics professor Khan Mohabbat, on March 25, 2008 “Though the stimulus plan was passed by Congress to boost the economy, Mohabbat said any transitory rebate plan will be less successful than a permanent stimulus plan. “It is a nice thing that the administration has done to boost economic activity,” Mohabbat said. “But it is going to have an extremely small positive effect.” (North Star Online)

“Extremely small positive effect.” That’s looking on the optimistic side. But according to attorney Erick S. Creach, this economic stimulus package might wind up doing more harm than good. For example, ‘the government will borrow (likely from foreign investors, thereby creating other more difficult issues such as the dollar’s shrinking power) or print new money. As Albert Einstein is credited with saying, "Insanity is doing the same thing over and over again and expecting a different result."’

Now that we have examined what a couple of experienced professionals think about the bill, let’s examine this bill through the eyes of logic. First of all, let’s look at the feasibly of the bill. Let’s say that someone makes around $6000 dollars a year, and his or her income tax percentage is around 10% (minus the other tax benefits). Tax time comes in April and they pay the government $600 for their income tax. Then, in May, they get $600 back from this economic stimulus package. We have successfully gone in a complete circle.

This is not just a theoretical statement. I will wind up paying the government just about as much as I receive from the rebate, which begs the question, why not just issue a tax credit and save the Government the trouble of playing hot potato with our money? Why, as some economists have suggested, does the government refuse to take care of the problem? Instead of entering into the cycle of insanity of spending money that we don’t have, why not cut taxes permanently and allow the citizens of the United States to keep more of their money? However, such tax cuts require cuts in government spending, a measure many politicians seem unwilling to complete.