Say Anything Blog

If checks from the government stimulate the economy like this, maybe the government should send everyone a check every month?

NEW YORK (CNNMoney.com)—Personal income surged in May as the government’s stimulus payment plan to jump-start the economy took effect, according to a report released Friday.

The Commerce Department said individual income shot up 1.9% in May as a result of $48.1 billion economic stimulus payments in the month.

Stimulus checks accounted for a huge 5.7% rise in disposable income, versus a 0.4% increase in the previous month.

Disposable income is what individuals have left over after they pay for their essentials such as food, bills and taxes.

“Income growth was pretty good… even if you exclude [stimulus],” said Scott Hoyt, senior director of consumer economics at Moody’s Economy.com.

Excluding stimulus payments, personal income rose 0.4%, which had been anticipated by a poll of economists by Briefing.com, up from 0.3% from April.

The basic concept here, that putting more money in the pockets of Americans stimulates the economy, is a sound one.  One that fiscal conservatives have been preaching for years.  What doesn’t make sense with these economic stimulus checks is that they’re fleeting, and terribly expensive to execute.

The recent checks were a one-time deal, and even if Congress and the President decide to do another check down the road the impact is limited.  These checks are isolated incidents.  Sure, a citizen gets a check in the mail and then goes out and spends it, but once those transactions are done so is the economic stimulus.  If we want long-lasting economic stimulus what we need is to put money in the pockets of citizens on a regular basis.

And no, that doesn’t mean making “rebate” checks a regular occurrence.  After all, why would we want to pay the government billions of dollars to collect our money from us and then turn around and give it back?  What we need is to stop the government from taking so much money away from us in the first place.  That means income tax rate cuts.

Yet, strangely, many of the same people who supported the economic stimulus checks oppose permanent income tax rate cuts.

Does that make sense?  Not even a little bit.  But I guess the politicians would like to horde as much of our money as possible at the federal level and only send us back a check every once in a while when we begin to dislike them too much.