U.S. Common Sense

I work all night, I work all day, to pay the bills I have to pay
Aint it sad
And still there never seems to be a single penny left for me
Thats too bad
In my dreams I have a plan
If I got me a wealthy man
I wouldnt have to work at all, Id fool around and have a ball…

Money, money, money
Must be funny
In the rich mans world
Money, money, money
Always sunny
In the rich mans world
Aha-ahaaa
All the things I could do
If I had a little money
Its a rich mans world

Thirty-six years ago, ABBA penned those famous words on their way yet another #1 album, but you could say they were penned today. The recent drop in the economy has hit many people in our country. Between gas prices jumping up and home values falling down, some people are finding themselves in a pinch. Truck drivers are threatening to protest while thousands of families are foreclosing on their homes each week, and what is the best our Federal government can come up with? Rebate checks costing taxpayers over $150 Billion.

Now, before I go any further, “free” money is always a nice thing, even if it was money originating from your income taxes. However, is giving out $600 per taxpayer really the best solution our bipartisan government could do for us at this time? The intention of these checks are for us to go out and spend spend spend in order to stimulate our economy, but is it our lack of spending the problem right now? In my view no to both questions. Addressing the second question first, many in our country have a spending problem, not a lack of spending. We are such a materialistic country that many people live in credit debt because they want the latest flat screen TV or fancy car or … a house they can’t afford. And that leads back to the first question.

If each taxpayer receives $600 and runs right to the store, what happens? The stores make money (which they pay taxes on), pays their employees (who go out and spend money), and cover their bills (which sends money to other companies). With each cycle, that $600 passes through multiple hands and transforms into more money and more credit. This is good for the economy and the government, but it doesn’t help treat one of the big reasons for our lagging economy, being the collapse of the housing bubble. So what should the government do?

In my view, that $150 Billion should have been used to restructure many of these interest-only mortgages and ARMs that have caused so many to lose their homes. By restructuring the loans, those who are invested in the mortgages will see a return on their investment quickly, rather than waiting years with the risk of their investment drying up due to increased foreclosures. This is good for business and investors. The homeowners in turn are placed into a new mortgage with fixed rates that they can afford and know that it won’t go up in the future. This brings stability to a volatile market by decreasing foreclosures. It also brings peace of mind to the homeowners that were close to losing their home (which is the best investment a person can make in their future). Also, banks retain their customers and aren’t left with homes that they must sell for a loss just to get it off their hands.

And what does all of this do? Increases tax returns! Banks pay taxes on their income from mortgage payments. Investors pay taxes on their return on investment. More taxes come from homeowners since they can now pay their bills. Property values remain stable and higher since there will be less foreclosures. In no time, the government will be receiving a return on their $150 Billion investment in the government while helping to stabilize the economy.

From a business point of view, it is a smart investment for their future. Why the government didn’t do this is beyond me, but then again, I do not have a degree in Macroeconomics. However, from a “common sense” point of view, it would have been more beneficial to those who are in need of help as well as for our economy than sending out $600 checks that may simply find a home in their savings accounts, being used as part of a monthly mortgage payment, or paying for gas. I do not see how this type of stimulus will improve the national economy.

For some additional reading, check out these sites:
Breitbart - “Bush says rebates going out Monday will boost economy”
USA Today - “Retailers dangle discounts to lure tax-rebate checks”
San Antonio Business Journal - “Uncle Sam plans to issue economic recovery checks early”
Rochester Homepage - “Early rebate checks: should you save or spend?”
M LIve - “The rebate checks are coming! The rebate checks are coming!”

For some additional reading across the web, check out these blogs:
Rocket Finance - “Saturday’s are for Coffee: Economic stimulus rebate checks”
The Consumerist - “Rebate Checks Start Arriving Monday!”
Moments in Time - “U.S. Citizens Get Ready For A Little Extra Green”
In Business TV’s Weblog - “2008 Tax Rebate checks: Is your tax rebate a fish for a day?”
The Wall Street Journal Economics Blog - “Too Afraid to Spend Rebate Checks”