Tax refunds cause misleading spike in US spending

By , Guest blogger

Strange creatures…strange events…strange thoughts… Zombieland is getting weird.

We are expected to believe six impossible things before breakfast, and another half dozen before lunch.

“…the current rebound in the economy is a statistical mirage,” writes David Rosenberg. It is “orchestrated by record amounts of monetary and fiscal stimulus that are simply unsustainable and actually risk precipitating a very unstable financial and economic backdrop in coming years.”

Recommended: Could you pass a US citizenship test?

But investors and voters seem willing to believe anything. Why else would anyone lend the feds money…or back their 2,400-page health care ‘reform’ bill?

We’re expected to believe that the same feds who couldn’t see the subprime fastball coming…

…and who struck out completely when they started to get overleveraged curve balls coming their way (they thought derivatives made the system more stable!)…

…have now hit a home run, with the bases loaded.

Yes, we’re expected to believe that the bad news bears – Bernanke, Summers, Geithner et al – have now won the World Series…by not only preventing a depression…but putting the economy back on track for growth and prosperity.

And now the feds are going to improve the whole system of health care, too. And we’re expected to believe that the $1 trillion program will not cost us a cent…and that the deficit will actually go down…that insurance companies will charge less…that doctors and nurses will work harder…that cripples will walk…that the blind will see…and that even teenagers with acne will suddenly have peachy-perfect skin.

We’re also expected to believe the Greek’s debt problems have gone away (thanks to a deal cut with the Germans)…and that America’s debt problems never even existed.

Why else would so many people lend the US so much money at such low interest rates?

Yes, dear reader, the crisis of ’07-’09 gave us a fright. But it’s all behind us now. How do we know? We just read the paper!

“Record volume of junk bonds sold,” says a news headline.

That’s pretty curious in itself. It means that investors think nothing can go wrong. If they thought something might go wrong, they wouldn’t want to buy junk bonds. ’Cause they’re the first to go south when trouble comes.

What are they thinking? What can go wrong? Everything… Everyone should be battening down the hatches and locking up the firearms.

Instead, they’re opening up the liquor cabinet and putting on the music. Consumer spending is up for the 5th month in a row.

Hey wait a minute. Why are consumers spending? Unemployment is still up around 10% officially. Unofficially, it’s much higher.

So how is it possible for people without jobs to increase spending? Strange, don’t you think?

And what’s this?

“Personal income drops across the country,” reports The Wall Street Journal.

This is becoming curiouser and curiouser….

Unemployed people whose incomes are falling are nevertheless spending more money. What are they spending?

Tax refunds!

Yes, it’s refund season. And a lot of people are asking for refunds. People who lost their jobs, for example.

Yes, it’s the feds to the rescue again. They’re sending back money to the taxpayers who earned it. We have no quarrel with that. And it certainly gives some air to the folks who are trapped underwater in their sinking ships. But that oxygen was earmarked for other spending. And so now the feds have to borrow more.

Add/view comments on this post.

------------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...