(04-14-2009 11:41 PM)OptimisticOwl Wrote:  

(04-14-2009 10:43 AM)Old Sammy Wrote:  If you gave me a tax cut today, it would get saved - I got a six-figure payment a while back from a client that went straight into a muni bond fund.

I'll tell you what I'm thinking, and you can tell me where I am wrong.

Your six figures went into the bond fund. What did they do with it? They bought muni bonds. So now your money is in the hands of the municipalities. What did they do with it? They built roads, or community centers, or swimming pools - whatever projects that bonds were voted for. So your money did get spent, just not by you. You will get your money back later(probably), as the municipalities pay back the bonds out of tax revenues. But the money is being spent now and is no different from the stimulus spending.Whether the guy leaning on the shovel is paid from taxes you paid or money you loaned makes no difference. He gets paid, period. The difference is, you probably get your six figures back someday is you have it to loan, you will never get it back if you pay it to the government in taxes.

Don't know that you're wrong, but here's my take: your conclusion that my $$$ went to pay for some municipal project (and thus provide stimulus) may not be true. It's true only if my $$$ went to fund new bonded indebtedness. If not, it went to some former bondholder who sold me his bond. What did he do wth the money? Don't know, but if any part of it went to pay down other debt, that portion isn't stimulus.

I think the argument on direct stimulus vs tax reduction boils down to how much of each goes to consumption vs debt reduction.