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14 Jan 2009 08:51 am
Bailing You Out With Your Money
Via Noam Scheiber, Business Week's Michael Mande argues for citizens saving their tax cuts:
The conventional economic wisdom these days seems to be that tax cuts or tax credits are bad because people save the money, rather than spending it...But this conventional argument misses the whole point. Consumers have a massive hole in their balance sheets these days. Home prices are plunging, incomes are slowing, and many families have huge debts. Americans are staggering.
From this perspective, the main purpose of the tax cuts and tax credits is to help repair consumer balance sheets, just like the TARP is helping repair bank balance sheets. I don’t want consumers to spend the tax cuts—I want them to save the money, as much as possible, and get their debt back to reasonable levels. That’s the only to ensure that consumers will be on solid ground when the recession is finally over. ...
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