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Home » are we missing something here?
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are we missing something here?

March 1, 2008
Mitch Mac Donald
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As this issue goes to press, the folks in Washington are still hoping we can spend our way out of a possible recession. On Feb. 13, President Bush signed into law an economic stimulus package he described as a "booster shot" for the ailing U.S. economy. Within the next two months, the government will begin mailing tax rebate checks to millions of Americans in hopes that they'll take the money and run—preferably to the nearest mall, boutique, or discount store for some intensive "retail therapy." The theory is that consumers will buy, retailers will re-order, and suppliers will crank out more goods, effectively keeping the nation's economic engines stoked.

The government is backing its plan up with cash—about $168 billion over two years, according to the Joint Committee on Taxation. Under the program, individual taxpayers can get up to $600 in rebates; working couples up to $1,200. Those with dependent children stand to receive up to another $300 per kid.

Sounds good so far, and most American taxpayers will no doubt welcome the extra cash. But it also raises some questions about fairness and equity, not to mention concerns about whether the plan will work.

To begin with, the payments are being called rebates. They're not.

A "rebate" is the return of some portion of an amount of money given in payment for something. But not everybody getting a "rebate" paid taxes. In order to get buy-in from the Democratic leadership in Congress, the measure's sponsors had to include provisions for sending cash to about 30 million people who don't pay taxes at all. That's not a rebate; that's a handout, pure and simple.

Aside from the obvious questions about the equity of sending taxpayer money to people who don't pay taxes, the measure raises other red flags. For example, the plan assumes that once they get their checks, Americans will run out and spend the money. But will they? A number of recent surveys indicate that while some recipients will indeed embark on a spending spree, plenty of others will pay off existing debt or put it into savings. It appears that the government is taking a pretty big gamble with that $168 billion.

What everybody seems to have overlooked is that there's a far less risky way to achieve the same result (stimulating the economy) that would have the added advantage of solving another critical problem: the nation's crumbling infrastructure.

As last year's tragic Minneapolis bridge disaster made all too clear, years of neglect are taking their toll on our nation's roads and bridges. And neglect is the only word for it. In the last 15 years, federal funding for highway and bridge construction, in real dollars, has increased exactly zero percent. In the same period, the cost of highway and bridge construction has increased just over 100 percent. It's not hard to figure out that at best, we're devoting half the resources to repairing, maintaining, and expanding our interstate highway system today as we did in 1992. And considering that by 1992 it was already apparent that the infrastructure was in a state of serious disrepair, it's clear that the issue has gone unresolved for far, far too long.

So instead of encouraging consumers to rush out to Target or Wal-Mart, why not spend the money on fixing some roads and bridges? Imagine, if you will, what would happen if the government put $168 billion worth of road and bridge projects out to bid. The winning bidders buy materials, hire engineers and laborers, and thus provide the same infusion of cash into the economy. As a secondary, but just as important benefit, at least some small number of dangerous roads and bridges get fixed.

Are we missing something here?

Supply Chain Services Business Management & Finance
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    Mitchmacdonald
    Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.

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