Sunday, April 27, 2008

$100+ BILLION giveaway to the oil, credit card and retail industries

Let’s just call this colossally shortsighted and ill-advised “rebate program” what it is - a giveaway of money that this government doesn’t have to the oil companies, the credit card companies and the retail industry.

We the People - at least those whose income levels are in the range where they are low enough to receive the rebates but most likely too low to be able to do anything meaningful with the rebates - are merely the intermediary between this corporate welfare program and the true intended recipients.

For starters, this so-called “stimulus program” does nothing to address the major underlying problems and issues that this wind-sucking economy is resulting from. Healthcare costs, extraordinarily high credit card interest rates, rising food, gas and other prices, decrease in real wages, negative savings rates over the past few years and tens of thousands of job cuts are just some of the many issues that this failing economy is based on, yet nothing in these areas are even remotely addressed by a $1,200 (if you are lucky) rebate check. Even if a family is eligible for the full $1,200 rebate, how many of the families will be able to use it to better their overall financial situation?

Just take a look at some of the numbers that were recently put together by the Center for American Progress (here are just some of the “lowlights” - emphasis mine):

Job losses mount. The already weak labor market has taken a turn for the worse. Employment declined by 80,000 jobs in March 2008—the largest loss since March 2003. Over the past three months, the economy lost 232,000 jobs. Average monthly job growth was only 44,700 jobs over the past 12 months, compared to 138,600 jobs in the previous 12 months, and 236,900 jobs in the 12 months before that.

Wages remain flat. Factoring in inflation, hourly wages were only 2.3% higher and weekly wages were only 1.1% higher in February 2008 than in March 2001.


Family debt hits record highs. Household debt averaged a record 133.7% of disposable income in the fourth quarter of 2007. In the fourth quarter of 2007, families spent 14.3% of their disposable income to service their debt, up from 13.0% in the first quarter of 2001.

The housing crisis deepens. New home sales in February 2008 were 28.9% lower than a year earlier, and existing home sales were 23.8% lower. The median sales price of existing homes was 8.2% lower in February 2008 than a year earlier, and the median sales price of new homes dropped 2.7%. The average monthly supply of homes for the six months ending in October was 9.4 months, the highest since January 1982.


People are paying more for basics. Transportation cost 9.5% more in January 2008 than a year earlier, college tuition was up by 6.2%, fuel and utilities by 5.6%, medical care by 4.5%, and food by 4.6%. Since March 2001, food prices rose by 21.6%, fuels and utilities by 36.3%, medical care by 34.1%, transportation by 26.1%, and college tuition by 63.5%.

So, when these checks come - where do you think they are going to go? Well, the sagging retail industry is already salivating:
[r]etailers worried about a consumer slowdown are already planning several ways for you to spend that windfall in their stores.


"We want to get people excited about spending this spring and summer," said Lowe's spokeswoman Chris Ahearn, adding that the retailer was considering allowing customers to cash their rebate checks in Lowe's stores.


...Penney CEO Mike Ullman recently told analysts that the retailer would "obviously compete vigorously" for the stimulus money.

"It couldn't happen at a better time for [us] because it sounds like the checks will go out over a 10-week period, beginning in late May, which leads right into back to school [season] for us," Ullman said.

Lovely - the economy is in horrible shape, so Americans couldn’t spend money on as much crap as the retailers were peddling during the holiday season, so instead of helping the consumers and Americans, why not just gear this so that the retailers can scoop up some of the money to prop up their bottom line over the short term. Screw the American family over the long term - there are toys and the latest fashions to be had.

And with oil at record high prices, and with gas predicted to be around $4 per gallon (if it isn’t already), oil companies that had record profits last year (including Exxon, which made $1,300 PER SECOND IN 2007), they certainly need the money more than American families who can barely afford their mortgage or rental payments, let alone food, medicine or other basic necessities.

A couple of months ago, I wrote a post decrying the farce that these rebate checks would be. And since then, there was a billions-dollar bailout of a private financial institution, while taxpayers were left holding the bag for their troubles, there was a huge increase in oil and gas prices, a big decline in jobs (an increase in job cuts), a huge spike in rice and wheat prices - further driving up the price of food and a further weakening of the dollar and economy in general.

But instead of dealing with the underlying issues facing American families - they get a token amount of money that is not enough to make more than a couple of mortgage or rent payments (if that), a couple of doctor visits, one or two past due credit card bills or to cover a couple more tanks of gas so that they can get to work, where they earn less in real wages than in many years - essentially giving it all back to those who are causing the economic failure in the first place.

The only part of the economy that will be “stimulated” is the part that needs it least, and those who need it most get to hold onto the check just long enough to pass it along to private corporate interests.

Because they need the $100 billion more than We the People (at least those who are eligible for it, but that is another issue altogether) - or more than an actual investment in this economy or infrastructure that will have long term effects.


Mark said...

Well said. The rebate program is a joke, yet another scam being pulled on the American people.

I don't agree that the oil companies and retailers are the ones causing this economic slowdown. I blame short-sightedness, coming from both our government's policies and the consumer's immediate gratification attitude.

Consumers and the government need to start spending LESS than they bring in.

If we really want to get a handle on these problems, we need to stabilize the dollar (which is the single biggest factor in rising oil prices) and rein in runaway spending, which only gets worse as existing commitments to entitlement programs spiral out of control.

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