Making ‘cents’ of the stimulus package

An economic stimulus bill that would give $600 to $1,200 to most taxpayers is intended to boost the national economy. But it might not be much more than a quick fix if it works, some local economy experts said this week.

The rebates might mean a brief boost to the nation’s economy if people spend the money, but it’s not a long-term fix, Opelika Director of Economic Development Al Cook said.

“Anytime there’s an influx of cash that comes in at one time, I think you’ll see a spike in spending,” Cook said. “But to me, it’s more of a short-term or Band-Aid type effect.”

Cook said he would have liked Congress to look at more long-term fixes, such as investment tax credits, that would strengthen the national economy.

“Anytime everybody in the country essentially gets a check, there will be a spike in spending,” he said. “Will that be enough? I don’t know.”

Auburn Economic Development Director Phillip Dunlap said he thought the stimulus package might have a positive short-term effect.

“Obviously, if more money is injected back in the economy, the more opportunity people have to spend that money, and retail generates a lot of sales taxes,” Dunlap said. “ ... A lot of people might save, but others will pay a bill with it or buy that extra thing they’ve been holding off purchasing. It has a chance to generate a trickledown effect.”

Fortunately, Cook and Dunlap said, the local economy is stronger than the national economy.

“Both Auburn and Opelika have been successful in recruitment of new jobs coming on stream right now,” Cook said.

Large employers such as Auburn University and East Alabama Medical Center also provide a strong foundation for the local economy, he said.

“They’re about as recession-proof as you can get,” Cook said. “People need to go to school, and people are always going to need medical care.”

But a little extra spending couldn’t hurt the local economy, Dunlap said.

As for the stimulus package creating a solution, Auburn University Professor of Economics Dan Gropper isn’t holding his breath.

“The effect won’t be much,” Gropper said. “Experience tells us tax rebates are not very stimulative because they don’t give people the incentive to produce more or change their behavior ... Tax rebates are great politics, not great economics. It’s no long-term solution at all. It is good election year politics.”

Rather than helping in the long run, the plan would most likely hurt the nation’s economic status, Gropper said.

“What this is really going to do is make the federal deficit bigger than it otherwise would have been,” he said.

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