Thursday, September 25, 2008

Alternative Bail Out Plans: The "We Deserve It Dividend"

A staff member of SPEA forwarded me this e-mail and asked why it wouldn't work (they seemed sure that it would not, they just weren't sure why):
WEDID (We Deserve It Dividend) -- The BEST Economic Plan EVER!

*As heard on The Bobby Rich Morning MIX, 94.9MIXfm, Tucson

Forget about the $700 billion bailout.

Instead, I'm in favor of giving the same amount they gave A.I.G. $85 billion to America in a We Deserve It Dividend.

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

Of course, it would NOT be tax free. So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage – housing crisis solved.
Repay college loans – what a great boost to new grads Put away money for college – it'll be there Save in a bank – create money to loan to entrepreneurs.
Buy a new car – create jobs
Invest in the market – capital drives growth Pay for your parent's medical insurance – health care improves Enable Deadbeat Dads to come clean – or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we're going to do another bailout, let's bail out every adult U S Citizen 18+!

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

My response:
Pretty funny, but they mistakenly calculate $425,000 instead of $425.

85 billion divided by 200 million (or 85,000 million divided by 200 million) is $425.

The principle idea of the plan is also mistaken. The money has to come from somewhere (higher taxes on households or government selling bonds to households), which offsets the money "given" back to them. If they print the money, it just becomes inflation and prices rise to offset the artificial increase in income.

3 comments:

Anonymous said...

I agree that this e-mail is silly, but I think it is assuming that the 700 billion (or the 85 billion give to AIG) is already raised, so the question of whether we pay it back through taxes or inflation is a sunk cost. Why give it to AIG instead of us conditional upon the money already being obtained is the issue that I think the e-mail is trying to raise.

I think the answer is that in the case of AIG there would be a huge multiplier effect. Spending 85 billion is a way of offsetting much more in damages to the economy later on from AIG failing. Also, with the 700 billion the Treasury is claiming that it will end up making the money back so that is how they avoid the problems that would've arisen from just taxing or printing money. Just giving $425 to everyone over 18 would not have the same impact and would not guarantee more liquidity or prevention of more economic damage in the near future.

I am not saying I agree with this plan, but that is what separates it from the e-mail plan in my opinion.

Debbie Duvall said...

How about a compromise to that? What would happen if we gave each taxpayer a large sum and require that they pay down their mortgage with it. Those without mortgages would be required to purchase a home. This would boost the economy. Those that are upside down in their mortgages right now would be right side up. The financial markets would be bailed out. Most Americans would be proud home owners. New construction would spike. It would be more fair than just handing cash to a few huge businesses that made bad choices. It would help Main Street as well as Wall Street. Let's try to trickle "up" for a change because it doesn't seem to make an impact to wait for a trickle down.

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