Tuesday, January 29, 2008

shortsighted rebates

It appears the senate will approve a slightly modified version of the $150 billion stimulus package agreed to by Bush and the House. The piece of the stimulus package receiving the most airtime is the seemingly free money every working adult will receive just in time for summer vacations. My little family of four (soon to be five) should get in the neighborhood of $1,800, maybe a little less depending on the senate’s tinkering. To receive our $1,800, all we have to do is not start a violent revolution when the federal government adds a mere $150 billion the federal deficit.

Let’s play with the numbers a little, shall we? I think I’m being generous assuming the government has to collect $5 to spend $4. Figure the cost of handling, mailing, policing, bribes, processing, printing, communicating, etc. A 20% cost of collection is probably giving the government more credit for efficiency than it deserves. Therefore, the government needs to only collect $187.5 billion to pay for the $150 billion stimulus package.

Let’s continue our generosity and assume the government will pay off this deficit in only 5 years with a 6% cost of funds. I have to admit it has been a long time since my finance classes in college. To keep things simple, I assumed the government would pay off the incremental deficit at the end of 5 years. Further assuming that I used the excel function correctly, the total cost becomes to just a smidge under $253 billion. There are 300 million people in this country, so my family’s bill for our $1,800 rebate is $843 per each of us, adding to a total of $3,372. It only costs my family 1.87 times the amount we receive.
I’m starting to feel simulated. When I feel stimulated, a part of me extends. You know the part. It’s the part just between my ring finger and my pointer finger. . . . on both hands.

No comments: