... and the rest of the world catches a cold.
The thrust of the linked story is that stock markets in Asia and Europe melted today "amid investor pessimism over the U.S. government's stimulus plan to prevent a recession."
"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."They're right, you know. One-time tax rebates were done in 2001 to bolster trhe economy after the jolt of that September's terrorist attacks. But,
Contemporaneous polls by Gallup, Bloomberg and the University of Michigan all found that the vast bulk of consumers expected to save the money or use it to pay bills. Subsequent studies confirmed these forecasts.And that, ladies and gentlemen, is how the American government fundamentally works. Bribing the voters with their own money is the basic task of federal office holders. Remember the $400 billion bribe?
In short, there is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The increased personal saving doesn't help the economy because the federal budget deficit, which can be thought of as negative saving, offsets all of it in the aggregate. The main benefit of a tax rebate would seem to be political -- giving politicians a way of appearing to be doing something about the nation's economic problems that is superficially plausible.
A new rebate ... should be called "feel good economics" because its only real effect is to make politicians feel good about themselves and buy re-election with the public purse.