The unforeseen costs of the "Economic Stimulus" checks.

OK, so let's be frank. The "economic stimulus check" Americans are receiving, does very little to stimulate the economy. In my analysis I will disregard the fact that the rebate "phases out" for individuals who earn over $75,000 annually and couples over $150,000 annually. I guess the Government assumes a couple who already paid $50,000 in taxes has no use for the money. Sort of like if I worked 70 hours this week due to tight deadlines and a co-worker worked 40 hours while e was bored, and then my boss said the co-worker deserved a day off but my vacation days were being cancelled because I worked too hard. It's crazy. But, that is a whole other subject.

Three questions to ponder:

1. IS IT REALLY STIMULATING ANYTHING? 

For one, if I am a business owner, let's say I own a plasma TV store. Sure, I might need to have some extra inventory on-hand because many people will use their refund to splurge  little. But, will I invest capital to increase my store size long term? Will I build an extra loading dock out back to handle this blip in demand? The answer is no. A short-term blip in demand will not drive long-range capital outlays or investments in the firm to increase production capacity. It will have no ripple effect. Permanent tax cuts, on the other hand, DO impact long-term business plans and therefore result in a desirable ripple effect.

2. HOW MUCH DOES THE PROGRAM COST TO EXECUTE? I don't know the answer to this. But, they mailed me a letter, which cost them 43 pennies for each stamp. There are 301 million people in the US, of which 72% are between 20 yrs old and 100. 216 million taxpayers. Times 43 cents each = $93 million dollars. Now, we'd need to add up, and these are all just rough guesses since I have no way of knowing what the real cost might be:

- The time it took the House and Senate to introduce, draft, and process/approve the bill. Well, there are 535 senators and reps and they all have staffers and overhead expenses. That can get costly in a hurry.

- Now the IRS who has to process the checks, research such things as - what if someone owes the IRS money from a prior year and is ineligible for the check? The IRS has roughly 40,000 employees. 

- How much more full are the USPS trucks? If each envelope weighs 0.1 pounds, that works out to 216,000 pounds of additional mail being delivered. That 108 tons. Assume an average truck trip of 10 miles at 10 miles per gallon. That's like tens of thousands of dollars of gas, not to mention what it does to the post office sorting fiasco.

My guess is that the cost of processing and sending these checks could easily exceed the $600 per person refund. 

3. WHO GETS MY MONEY IF I DIE WHILST WAITING FOR THE CHECK TO COME? The average death rate in the US for people ages 20 to 100, per 100,000 people is roughly 5,000. In other words, about 5% of the tax-paying population dies each year. Again there are roughly 216 million people between 20 and 100 in the US. So, 1.1 million people have a death which creates a situation where someone needs to research and figure out next-of-kin entitlements, etc. The good news is, the good people over at the IRS have developed a Form 1310 which you can file to have the refund transferred (how many hours do they spend on the phone answering that one at $20 per hour?). Let's say the IRS devotes 2 hours to each case at a labor rate of $20/hour. There is another $40 million in processing fees. 

Anyhow, the stimulus check was a nice try. But, here is a novel idea - cut Government spending and give us all a permanent tax break! That, to me, would be much more stimulating.