This Stimulus is the Wrong Medicine
We've now come to the point where everyone finally believes we're headed for, or in, an economic recession. So far so good. Now begins the process of identifying the quick fix.
We all want a quick fix to this thing: Just take this pill and go have a nap. When you wake up it will all be over and we'll live happily ever after. Trouble is, tax rebates aren't going to do much good, if any. A good portion of the rebates under discussion will simply be socked away.
And it's easy to see why the economic stimulus package under discussion is the leading quick fix candidate. This recession is fueling itself with a nasty combination of rising prices and contraction in the business cycle led by slowed spending on the part of the consumer. Handing the consumer a check to go out and spend presumably will jump start spending, providing needed cash to businesses, who can use the cash to pay suppliers, who will then in turn spend that cash with their suppliers...
If people take their tax rebate checks and stash them away - Incidentally, this is a good time to invest found money in stocks. - the cycle of spending never begins. The quick fix won't work.
But the prospect of a tax rebate economic stimulus not working doesn't bother Congress all that much. They know it won't work, but that's not what matters to them. What matters to each member of Congress is that he or she be seen as a person of decisive action. Even better if his or her decisive action results in a check showing up in voters' mailboxes. How often do elected officials get to legally buy votes? And with voters' own money, no less.