Economic Stimulus and Bailouts: Rewarding Poor Decisions

I talked to my dad on the phone last night, and he was (rightfully) complaining about how we’re rewarding poor decisions left and right. And we are. Citi is a prime example. The reason I like Citi as an example is because the company is so hypocritical about the whole thing.

Citi has been, in effect, saying this to upset credit card customers in good standing who are outraged over increases in their interest rates: “We’re sorry, but it was your decision to carry a balance. We can raise interest rates whenever we want, for whatever reason we want. You’ll have to live with the consequences.”

Yeah, well, Citi, it you made a number of very poor business decisions yourself. But, unlike the rest of us who have to live with the consequences, you are getting a bailout (at our expense I may add), raising interest rates and still paying executive bonuses. It seems as though Citi is having a hard time practicing what it preaches. But that’s okay. Because Citi is too big to fail.

A commenter on my Yielding Wealth blog had a different take on things. Remember that $700 billion bailout passed a couple of months ago? There is still between $300 and $350 billion left of it. Well, Bruhar suggested this in a comment:

Pay $100,000.00 taxable dollars to every tax payer with income $250,000.00 or less. This should equate to around three hundred billion dollars and result in instant stimulus to economy and housing and auto industry.

That money’s gonna be spent. You know it is. And we’re going to have to pay it back with interest. So, what if it was sent to us instead of the big guys? Sure, a lot of taxpayers have made unwise decisions. But the stupid decisions made by individuals aren’t nearly as huge as those made by the corporations that are getting billions. Consider what someone in foreclosure trouble could do with a tax-free $100,000. Put it toward the mortgage and refinance the rest to an affordable payment.

I could pay off my student loans. And maybe I’d buy something, stimulating the economy. I mean, if they want instant stimulus, there could be a requirement that everyone has to spend $10,000 of the money on new consumer purchases — whether it be a car or lots of little things. Our economy is basically one massive cycle of shifting money around and around and around. If you’re going to spend that kind of money, you might as well give it lots of people who can make a bigger collective impact.

If we’re going to reward poor decision-making, we might as well reward as many people as possible. And when you reward the taxpayers, at least some of the folks getting the reward actually made good decisions.

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