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Do We Need Another Stimulus Check?

by Ryan Guina

Last week I wrote about the possibility of another stimulus check. Since I wrote about it, I’ve gone back and done some more research. Obama’s campaign is calling it an “emergency economic plan” designed to help people in the US combat rising energy costs. This is a two part economic stimulus plan that calls for taxing large oil companies to redistribute the money to individual tax payers.

Two part Emergency Economic Stimulus Plan

The first part of the emergency economic stimulus plan is a $50 billion emergency energy rebate which would give permanent tax breaks of $500 to individual workers and $1,000 to families. This could happen as soon as this fall. According to Obama, “This rebate will be enough to offset the increased cost of gas for a working family over the next four months. Or, if you live in a state where it gets very cold in the winter, it will be enough to cover the entire increase in your heating bills. Or you could use the rebate for any of your other bills or even to pay down debt.”

This is the first part of Barrack Obama’s Emergency Economic Plan:

1. Forcing big oil companies to take a reasonable share of their record breaking windfall profits and use it to help struggling families with direct relief worth $500 for an individual and $1,000 for a married couple. The relief would be delivered as quickly as possible to help families cope with the rising price of gasoline, food and other necessities. The rebates would be fully paid for with five years of a windfall profits tax on record oil company profits. This relief would be a down payment on Obama’s long-term plan to provide middle-class families with at least $1000 per year in permanent tax relief.

The second part of the plan calls for a $50 billion stimulus that, according to Obama’s campaign, would save more than a million jobs. The money from this part of the stimulus would be split among state and national government agencies and would go toward rebuilding roads, repairing bridges, and repairing schools.

This is the second part of Barrack Obama’s Emergency Economic Plan.

2. $50 billion in immediate measures to turn our economy around and help prevent more than 1 million Americans from losing their jobs:

  • $25 billion in a State Growth Fund to prevent state and local cuts in health, education and housing assistance or counterproductive increases in property taxes, tolls or fees. The fund will also ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months.
  • $25 billion in a Jobs and Growth Fund to replenish the highway trust fund; prevent cutbacks in road and bridge maintenance and fund new, fast-tracked projects to repair schools – all to save more than 1 million jobs in danger of being cut.

How will the US Government pay for another round of stimulus checks?

By raising taxes. Obama’s plan calls for placing a windfall tax on oil companies to pay for the emergency economic stimulus plan checks sent to taxpayers. Obama’s plan calls for the stimulus checks to be paid for with 5 years of windfall taxes, but he also calls for the individual tax breaks to be permanent.

How will the US Government pay for the combined $50 billion for the State Growth Fund and the Jobs and Growth Fund? There was no answer. Actually, the purpose of the State Growth Fund is to give the states more revenue without forcing the states to raise taxes. Raising national taxes must be a clever way around that.

Something doesn’t add up. The $50 billion emergency economic stimulus plan for individual tax payers will take 5 years to pay off using windfall taxes on oil companies, but the tax breaks are also supposedly permanent tax breaks. The money for the State Growth Fund and the Jobs and Growth Fund is as of yet unaccounted for. The paper didn’t specify if these are to be permanent as well.

Do we really need another round of stimulus checks?

What is the Obama campaign trying to accomplish? Obama’s written policy states that he wants to tax oil companies for 5 years to pay for 4 months of relief for American tax payers. That doesn’t seem like an efficient use of resources to me.

The State Growth Fund and the Jobs and Growth Fund both have more appeal to me. The goal of each of those funds is to create something. Create jobs, create roads, create opportunity. And that is what America is about – opportunity.

If you are going to go for broke, then go for broke while trying to create something. Not while trying to buy votes.

Reader Poll – should the US Government sponsor another economic stimulus check?

This article was published in conjunction with a reader poll. The poll is now closed and the results are published below:

Poll: Will Another Stimulus Check Help the US Economy?

  • It’s just what the doctor ordered. (56%, 1,655 Votes)
  • I don’t care just show me the money!!! (20%, 598 Votes)
  • It won’t make much difference, but we should do it anyway. (15%, 432 Votes)
  • It won’t make much difference, and it’s a bad idea. (9%, 262 Votes)

Published or updated December 29, 2011.
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{ 28 comments… read them below or add one }

1 Dividend Growth Investor

I am not a big fan of extra taxation..But the money has to come out of somewhere I guess.
But if you tax the oil companies and save 1 million jobs, how many jobs will be lost ig those companies ( and anyone who deals with them) decide to cut back on US staffing in order to maintain profitability?
My solution is to let all illegal immigrants ( as well as kids that have US university degrees) become permanent residents but only if they pay a penalty tax or let them buy a house.
That way the politicians will solve several problems at once- housing crisis, economic crisis, and finding extra money by finding a new stream of taxpayers.

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2 Ryan

I don’t think a penalty tax for illegal aliens would be a good solution. Not many people would be able to afford it, much less willing to pay it when they have gotten by for so long without paying taxes. That is one of the major problems with illegal immigrants. Many of them pay no taxes at all. The aim shouldn’t be to punish the illegal immigrants, but to punish businesses who hire them illegally and don’t require proper documentation. That however, is a much more complex issue and way out of the scope of this blog.

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3 WealthBoy

I agree that Obama is trying to buy votes. The idea of having the oil companies give us money sounds dangerously communistic if you ask me. Although taking from the rich and giving to everyone else sounds good in theory, it is completely contradictory to what capitalism is all about.

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4 Dividend Growth Investor

Actually many illegal aliens to pay taxes believe it or not. Every year the Social Security administration finds about 50 bln which cannot be traced to a social security number.
And at the end of the day even when you buy a bottle of water, you pay sales tax in most states :-)
But you are correct that this is not the scope of this blog. Although I am thinking I should be a great politician with my training in finding alternative income stream..

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5 Curious Cat Economics Blog

No we should not raise taxes to pay for another round of government spending. The current administration paid for the taxes by raising taxes on the future. Unless you cut some other spending to pay out money you are raising taxes. Either you raise taxes immediately or you borrow and let someone else deal with paying for what you spend. It is as though parents could just keep getting new credit cards without limit (or maybe say with a $150,000 limit) and just have their kids pay. That is what the American people have elected politicians to do for the last 40 years. Eventually I am guessing the people will get tired of the huge percentage of the government taxes that go just to pay off the interest they charged earlier in their life or their parents did. I wish that day would hurry up and come. Because the USA is doing great harm to its future with these continued credit card habits.

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6 deepali

Do you have to ask the hard questions on Monday?! :)

I think we need stimulus, but not necessarily a check. I agree that we ought to be building something instead…

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7 Jarhead

Windfall profits tax huh? Interesting. Why only on the oil companies. Maybe we should put a windfall on all the lottery winners as well. Everyone would agree that winning 200 million in the lottery is a windfall so why not tax them even more. Or how bout those who receive a huge inheritance wouldn’t you consider that a windfall. How bout Google who is damn near printing money. Visa is making a killing as well are these companies going to get hit by this tax? Bill Gates and Warren buffet are worth billions let’s take some from them.

No Obama wants to single out the oil companies because they are making so much. The oil companies are also spending a whole heck of a lot. Also as pointed out in the earlier post it is the American way of life to make as much as possible (that’s capitalism guys). So let’s forget about this windfall tax and do something right for once and unscrew the system and the tax code.

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8 Double Journey

This plan makes so little sense for so many different reasons. I wrote about the exact same topic today.

The net result of this will be that this tax will likely hurt the people it tries to help because it will in effect raise gas prices by decreasing supply and increasing demand. It’s crazy but true.

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9 Ron@TheWisdomJournal

Few Americans realize that when they fill their gas tank, more cash goes to the government than to any oil company. Our Federal Government not only collects gas tax at the pump, but they already take an average of 50% of oil company profits through a myriad of other various taxes. So…Exxon not only generated $11 billion for their shareholders this past quarter, they poured in $11 billion to Uncle Sam’s coffers as well. Obama says this isn’t enough from ONE company?

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10 deepali

@ Ron – Well, someone has to pay for the Valdez cleanup. :)

But I have to say – what the government makes off Exxon is a strawman. That money goes to improving roads, etc. (and schools and superfund cleanup…)

Also, talking about Exxon’s tax liability is sort of moot as well. The excise and other taxes are partly taken care of with subsidies, breaks, credits, etc. Some of it is also passed along to consumers – that’s generally how business works. And income tax is pretty much deferred forever (back of env calculations, Exxon’s paper tax rate is around 10%, not that they actually pay that).

Sooo… if they get windfall taxed, well so life goes. It’s a corporation, not a person.

But the real question – whether it makes economic sense… frankly, I think it does (to some degree). Yes, it’s a political move, but it doesn’t mean it’s a ridiculous idea. I think we need to take politics and ideology out of the picture and think about this in terms of pure economics…
And what to do with that extra profit? I’m all for letting states decide (perhaps with some guidelines).

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11 Ryan

I agree Deepali, there are a ton of tax breaks and credits the government gives the oil companies and other corporations. Perhaps that is part of the problem. The tax code has so many holes in it that many companies are able to write off practically everything each year. Without some form of tax reform, it is increasingly likely the government won’t even reach the first step in righting out economy… creating a balanced budget.

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12 Emily

As much as I like Obama, I think this is a pretty bad idea. Earlier today I read a newsletter from a financial/investments planner who said that while the oil industry is making a ton of money, their profit margin is only 8.5%, whereas Disneys is 14.1%. Disney has less revenue, but makes more of a profit margin. The oil industry has TONS of expenditures — exploring, drilling, and dealing with rebels in unstable countries. I really don’t think it makes sense to ask them to pay us — all of the problems lie with issues in other countries. I think it’s just a Band-Aid. Not a real solution. As much as I’d like some extra money in my pocket, I don’t think I can stomach more taxes.

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13 Ron@TheWisdomJournal

It all boils down to this:

People despise other people and corporations that make money while employing tens of thousands, yet they trust the government who takes 40% of their money and squanders it. Conservative estimates are that the US government wastes 65% of all the money it forces us to pay with threats of imprisonment. Yet people will vote for someone who wants to take MORE OF IT!

Oh, and Exxon DID clean up the spill ($1.25 billion).

Read page 38 of their annual report from 2007.
Taxes paid? $72.681 billion – ZERO media stories
Net Income? $40.610 billion – one media story for every dollar made.

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14 Jesse

It really makes me squirm to see even a mention of another government handou….err I mean economic stimulus check. I guess people (and especially politicians) don’t realize that the time will come when we have to pay the piper…of course maybe the politicians really do realize it and they are evil enough to play on the ignorance of the masses to get votes. Very Atlas Shrugged-esque…

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15 VPARKER

Everyone that is talking about not getting this 2nd check and don’t won’t it are the people that are in the higher taxes. Me and my husband work and were still trying to see how were going to pay for christmas this year. Because were just living day by day let me tell you that money will help me pay bills and get food and get my kids something simple for christmas. So I really, really need it. thanks.

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16 Ryan

VParker: I haven’t heard much new about a second stimulus check in recent days – most of the media attention has been on the bank bailout and the general state of our economy. I know a check would be helpful for a lot of people, but I don’t know whether it will happen or not.

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17 birk

I think if they took that bailout, and split it between all are tax payers!! People could pay there mortgage and help the average people like me and vparker pay there overinflated bills and pick something for there kids for Christmas. just think approx 800 billion usd divided by As of 2007, there are about 138 million taxpayers in the United States I dont know but that sounds like a lot more then about 1000 usd Just think about it there would not be a reason that people could not pay there mortgage dumping billions back in to the country helping everyone not just those at the top

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18 candace

i feel that we should get another stimulus due to the high economy. i mean gettin a second stimulus check will be really helpful for us single parents that are struggling to provide for our kids.

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19 margie

are their going to another stimulus check coming we need it for christmas

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20 Ryan

Margie: Right now the government has not decided on whether or not to pass another stimulus check. IF they do, it may take longer than a couple weeks, so it is not likely we will see another stimulus check by Christmas.

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21 joann

How about instead of putting the money directly into the auto industry and a stimulus check with no purpose we get a voucher that has to be used as a one time car purchase one vehicle per family which enshures that the money is going to go back into the industry that is struggling the worst.

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22 joann

or maybe we should invest all of the money into an account split between dte and consumers energy to help families who can not afford to pay the enourmous bills instead of paying people at outside agencies to decide if they can help you with a shut off you would be saving money and dte and consumers could handle it from there end. JUST A THOUGHT!

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23 joann

Oh and one more thing what good is it going to do for everyone to splurge for a minute when the real problem is there are NO JOBS IN MICHIGAN where you used to see a group of teanagers working at Mc Donalds now you see middle aged adults trying to work for min wages to pay astronomical bills and care for their children. So I feel that the stimulus check is not usefull in the hands of society members it should be used to help fix the issues that are causing people to continue loose houses, jobs, and live without heat or lights. Maybe another idea would be to auction the money off to those who would like to create small businesses or open franchise so that it would create more jobs and a continued revenue not a fix for one month or so.

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24 joann

And i to am a single mother who would love to give my kids everything they want for x-mass but come on lets be real you know that as a single parent that little bit of money is not going to fix the long term problems of your economic status. Rather that being able to just catch up a bill or go out and splurge a little bit for a breif moment or spoil the kids for christmass who most of todays children forgot that its not about presents but family and togetherness wouldnt you rather see the money go into something a little more long term. Like creating more employment purchasing a decent dependable vehicle that will not break down every other week which good luck finding that with $1000, or possibly making utilities a little more affordable to the average family.

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25 melissa

i think obamaha should go for a second stimulus check because i feel that it will work this time .you got families struggling to support their family because of the economy and i will admit this world is at lost because of the economy .so if you are looking for a really good reason to go for the second stimulus check then look at what wonderful thing you will be doing for the families all around the world that is struggling and this will help them out just right . thank you melissa hooper

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26 Humza

I think the rich people should be taxed more and also any business that is hiring illegal immgrants should be punished and taxed triple. I have nothing with the illegall immgrants, I think majority of them are hard wokers and they do pay the taxes. Go after the rich people, like the Hiltons, the playboy bunnies and ever actor that is doing those realty shows. Take the corrupted politicians away from the seat and tax them as well. Its all about the $$$$$.

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27 John Akins

Where do people come up with these hair brained Ideas.If you TAX the oil companies the oil companies will pass the TAX right back down to the consumer at the pumps.So any way you look at it we are the ones who are paying the TAX not the OIL Company.

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28 Bruce Ratte'

Another stimulus check is a wonderful idea I think. It would be a great relief to many families, disabled people and elderly that struggle from month to month trying to keep shelter over their heads and food in their stomachs. I think people that are opposed to the stimulus have no idea what it is like to hope nothing happens so you will have the money to pay your rent or mortgage payment every month or what it is like to actually not know where your next meal is coming from or the feeling in your heart to look at your children and wonder how you are going to feed them for the month with the $200 you have left after paying for shelter, heat, lights, water etc etc etc. Quite frankly I dont care if they tax the huge oil companies for the money. They are very fortunate to have the vast amounts of wealth they have and should help support the country that gives them the opportunity to have that wealth.They should love this country and the people that live in it that help them to be as succesful as they are.Of course this is just the opinion of a man that does know what it’s like to worry about having shelter, paying bills and not knowing for sure where the next meal is coming from.

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