Tax Cuts VS. Stimulus Packages

I've been wondering for the longest time if people have given any thought to the difference in effect of a tax cut and a stimulus package. It took me awhile to figure out, but I think I finally came up with a few reasons why a stimulus package would be preferred by our wonderful politicians. Though really, why the populous refuses to think this through and see how ridiculous the idea is on an economic level just drives me nuts.

First of all, the politician's motive. Unlike a tax cut, a stimulus package is a one time deal. They don't have to vote to raise or lower later, and it comes with a lot less controversy. Second, if successful, which we will soon see is hardly possible, they gain popularity. Third, it would seem to work a lot quicker, if it worked at all.

Unfortunately, from an economic standpoint, it stands a very slim chance of having any long term effects. One example of this would be the cash for clunkers idea. The theory is that people would go out and sell their old cars and buy new ones. Saving the jobs our auto industries are so quickly losing. It's real effect though is that while costing taxpayers billions of dollars, it only created a temporary incentive to buy cars at a time when Americans aren't wanting to make such a large financial commitment. What good does this do for the auto industry in the months to follow? It would seem to me that these stimulus packages are nothing more than life support for the terminally ill. Which is great for comforting friends and family, but doesn't much matter in the big picture fate has to offer.

Tax cuts, however, would reward the successful and ambitious companies who still had valuable products to offer. Auto industries that didn't make decades worth of poor decisions would still thrive, while the foolish would fade to black. I think we can assume that the demand for vehicles isn't going away any time soon. So we can also assume, in a world of supply and demand, that other companies would come up to replace them. From the failures we would have numerous lessons for the up and coming. Subjects such as; overpowering unions, pensions vs. 401k's, distribution of labor, rate of new technology, etc... We would come out bigger, stronger, and with the kind of jobs that would last for decades. This is how Capitalism works friends, it recycles. If we get in it's way it doesn't mean we are going to stop the process, we just may get lucky and prolong it until the next guy is in office.

Real effective change requires us to quit prolonging the inevitable, and to let nature take it's course.