Tax Rebates Can’t Rescue The Economy

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For someone who buys 600 gallons of gas at a price per gallon which is $1 higher than it was last year, a $600 federal tax rebate is not much comfort. Merrill Lynch sees that .

According to Reuters "I still maintain the business cycle is bigger than the government," Merrill’s North American economist David Rosenberg said.

For the rebate to be meaningful, the checks from the government would have to be closer to $2,000 to $3,000. Gas is not the only enemy to disposable income. The price of many food products is rising as commodities like corn and rice double. Research released yesterday shows that home prices in almost every one of the states are still falling. Getting refinancing and selling homes at a profit have become difficult, if not impossible.

The Administration and Congress underestimated the need for cash in most US homes because they did not see inflation coming. Now it is here, and a few hundred dollars will not change that.

Douglas A. McIntyre