Our View: Tax rebate is more like a loan
"He that goes a borrowing goes a sorrowing."
Poor Richard's Almanac, 1757.
Most Americans can hardly wait for their bonus payment this spring or summer.
After a fast-track process in Congress last week, President George Bush's plan to stimulate the U.S. economy received huge, bi-partisan support in the House of Representatives.
While the U.S. Senate has yet to vote on the compromise plan, signs are that some sort of stimulus package will put more money in the hands of many taxpayers.
As a result, each low- and middle-class American could be getting a $600 "rebate" check in the mail in the coming months, or $1,200 for a couple. Families with kids will get an added $300 bonus per child.
No one can argue that the move would have an immediate impact on the national and local economy. With more cash in hand, consumers will unzip their wallets, which have been sealed tight for months.
Federal officials hope the extra wave of cash will sweep over the U.S. and pull us out of our downward recessionary trend.
Trouble is, the money being sent to each of us is money that the federal government is borrowing from us. Because the United States is already entrenched in deficit spending, any new spending means more red ink in the federal budget.
What's that mean for us? Eventually these rebates/loans will have to be repaid with interest. And, ironically, we're the ones who will have to pay it back through taxes.
The pending congressional action is a bit like a dad telling his son about an unexpected bonus as part of his allowance. The kid would be excited, until the father tells the boy that the money will have to be repaid later with interest.
Despite all the hype, the rebate checks could also spell more trouble for the U.S. economy in the short term. With more cash flooding into the national revenue stream, the value of the American dollar could continue to decline, making meaningful economic recovery much more difficult.
Of course, rebate checks make sense for politicians in the midst of an election year, especially when national polls indicate that Americans feel the economy is the nation's top priority.
If the rebate plan is approved, when those politicians are out on the campaign trail, they can remind us all of the bold economic action they took earlier in the year.
But when the loan comes due a few years from now, it's doubtful any of them will be at the front of the line to take credit for the growing federal deficit.