I had the pleasure of speaking with the great Congresswoman Jackie Speier (D – 12) earlier this week. She mentioned, as an example of the difficulty of fiscal stimulus, that President Bush’s tax rebate checks caused nary a bump in consumer spending, according to studies, except in the purchase of plasma TVs. The punchline, of course, is that most of those are built in China, Taiwan, Korea, and Japan. US government stimulus dollars going to overseas folks.
And that got me wondering. Is that true? And if it is, is that a bad thing?
On the question of truth, it’s pretty clear that economists can give you virtually every answer you want. The theory says that the impact on the economy is minimal, as the increase in consumer spending is balanced out by the reduction of government spending (or in the U.S.’s case, the increase in debt funding). Still, University of Chicago economists say the stimulus checks increased consumer spending while the good folks at Deloitte see any gains as limited in both size and duration. The Chicago data indicates about 20% of spending on all durable goods, which includes plasma TVs, but also lawn mowers, furniture, and dishwashers.
OK, so maybe this plasma TV comment was a bit of rhetorical flourish. So my next question is, how much should we care if it all went to plasma TVs? That will be the next post.
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