Friday, March 9, 2012

I think I see a connection here...

According to this article from, the U.S. government reported an all time low deficit for the month of February reaching $229 billion. They say that the reason for this large deficit (which surpassed last year's low by $6 billion) is a decrease in revenue do to $25 billion in income tax refunds. The reason for this substantially high refund, they say, is because of the extra day in February this year, giving people just enough time to file for tax returns for the month, that they would normally not get in the three years in between. It also reports more depressing news, saying that the overall deficit this year is projected to (once again) be $1 trillion. Sounds like the economy's doing pretty bad right?
The article also said that American's wealth increased by 2.1 percent, that stocks were going up, and that household wealth (which is the measure of value on assets like houses, banks, and stocks) has also increased and is slowly approaching its pre-recession peak of $66 trillion (which is a good thing).
So what I'm seeing here is that even though the government is experiencing a deficit, the wealth of the American people is increasing. I think this is saying something about tax refunds and what they're doing for our economy right now. The report spoke of the $25 billion income tax refund like it was a bad thing, but what it I actually see is that it more likely helped the U.S. economy, rather than hurt it. This refund put money back into American's pockets, which they then spent and invested in stocks.
Now let's refer back to the Bush tax cuts. After taking in all this information doesn't it seem like a cut in taxes is a pretty good idea? The government may not be getting as much money, but the economy is still growing.

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