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Personal Incomes Soar Thanks To Tax Rebates-Or Do They?

June 27th, 2008 | by Ken Grandlund |

Boy oh boy, George W. Bush must be doing the happy dance in the Oval Office this morning as newspapers and media outlets are all chanting the same verse: personal incomes in May rose to the highest levels in 33 years! 

What? I thought we were in some kind of recession. And rising gas prices are causing the price of everything to go up, up, and away. Thank god for the stimulus checks, because now we are all richer than ever!

Oh, wait a minute…no we are not.

The influx of tax rebates into the hands of ordinary Americans is a temporary blip in an ongoing downspin of the economy, not a harbinger of good economic times ahead. $600 buck a head may create a momentary uptick in consumer spending, but once the money is gone, income is right back to where it was-falling and failing to keep pace with inflation.

Despite the hoopla in today’s press, personal incomes, WITHOUT THE EFFECT OF THE STIMULUS REBATES, are actually flat. And when you factor in inflation and the costs of food and fuel, the personal fortunes of John and Jane Doe gets worse every day.

Economists only expect about 40% of the stimulus checks to actually find their way back into the consumer market anyhow, as people either pay down debt or save the extra cash for a rainier day instead of rushing out to buy a new flat screen television.

So Bush will have to wrap up his celebration a little early, especially since there isn’t much to really celebrate about. (Well, for him there probably is- his aides no doubt only show him the headlines that say all is well.) As Steven Pearlstein of the Washington Post reminds us, our economic woes aren’t over yet:

“This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.”

Add inflation and recession and what do you get? Soaring personal incomes due to artificially induced, one time cash infusions? Nope- just damn tough times ahead.

Enjoy your rebate folks. According to the press, you’re doing better this month than you ever have before. I bet you feel better now and your economic outlook has never been rosier.

(cross posted at Common Sense)

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  1. 2 Responses to “Personal Incomes Soar Thanks To Tax Rebates-Or Do They?”

  2. By steve on Jun 27, 2008 | Reply

    I banked mine. I have no idea what “rainy” day is coming. I gave my son his into his bank account. Personally I am not spending any money on anything I don’t need. This is simple home improvement stuff or computer shit or anything else. I am just enjoying what I have.

  3. By Ken Grandlund on Jun 27, 2008 | Reply

    Mine goes in the bank today, but it won’t be staying long unfortunately. I’m using it to pay for my daughter’s summer care.

    Net effect on my personal income? A big fat zero.

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