Economic Stimulus: Take Two

July 16, 2008

According to a recent Bloomberg article, Speaker Pelosi has suggested another round of economic stimulus (no details reported). The first round of stimulus checks, according to some, was gobbled up by rising energy prices. In addition to rebates, another stimulus package may include additional funding for infrastructure, unemployment benefits and state aid. This sounds more like an appropriations bill.

Every time the government collects revenue, holds it, then sends it back in the form of rebates, some of that money disappears. The first round of stimulus checks will cost up to $862 million in lost enforcement revenue and administrative costs, an absolute deadweight loss to the economy. Instead of utilizing this “revolving door” of taxation, perhaps citizens could keep just a little more of their paychecks and buy gasoline with their own money. If giving money back to the taxpayers provides stimulus, letting taxpayers keep their paychecks also provides stimulus in the form of…wait for it…consumption and savings.

For more Tax Foundation commentary on the stimulus packages, see:

Fiscal Stimulus: Missing the Big Picture?

Economic Benefits of Fiscal Stimulus Likely to Be Small

First Stimulus Payment Checks Mailed Today

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