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Different Strokes for American Folks

When the US stock market crashed in October 1929, the US economy gradually slipped into what has been called The Great Depression.  Lasting over a decade, the Depression saw some 27% of the American work force unemployed.  Soup lines formed to feed the hungry.  Shanty towns sprang up to house the indigent.  And Americans migrated in search of illusive work. 

Then President Herbert Hoover mistakenly saw the Depression as a consequence of market forces.  Convinced that the best government strategy was non-interference, he essentially sat on his hands while conditions worsened.  His attitude cost him the presidency, for in 1933 Franklyn Delano Roosevelt was elected by a population demanding change. 

During the first 100 days of the “New Deal” presidency, the Roosevelt administration, based on the assumption that the federal government was needed to bring the country out of depression, enacted banking reform laws, emergency relief programs, work relief programs, agriculture programs, the Social Security Act, and measures to protect unions, tenant farmers and migrant workers.  Several New Deal enactments remain today:  Federal Deposit Insurance Program (FDIC), Federal Housing Administration (FHA), Tennessee Valley Authority (TVA), the Securities and Exchange Commission (SEC) and the Social Security Administration.

Despite these beneficial measures, the question has often been raised that the Great Depression (1929 – 1941) could have been shortened had the government put more money into the economy.  From the outset of his presidency, Franklyn Roosevelt was not very keen on deficit spending.  In the year he took office, the US national debt was $22.5b.  Five years later, the debt had risen to $36.5b; Roosevelt would have said due to government economic recovery programs.  At the start of World War II, the debt had risen to $49b.  But just four years later, due to the war effort, the debt was $258b ($2.8t in today’s dollars).  The United States emerged from the war as the major world economic power, its population entering a highly prosperous period that would extend over the next decades thanks in no small part to the spending crisis brought on by the war.

Fast forward sixty-three years to 2008.  Between May and July this year, the federal government will be handing out $110b in economic stimulus payments to some 130m American households.  Qualifying individuals can receive as much as $600 ($1,200 if married filing jointly).  Individuals receiving payments may also receive $300 per each child who qualifies for the child tax credit.   

Coming at a time when the US economy is clearly in recession, the president is hopeful that these rebate checks will give the economy a much-needed boost.  Hence the package is called Economic Stimulus.  But it also comes at a time when the national debt is a staggering $9.3t with no relief in the foreseeable future for the US dollar to strengthen, something Americans abroad who receive pensions and social security checks in dollars are keen to want to know. 

Qualifying for a stimulus payment depends on whether tax filers have at least $3,000 in earned income, which includes Social Security benefits, certain veteran’s payments, nontaxable combat pay, wages, salaries, and self-employment.  Foreign earnings excluded by the foreign earned income exclusion apparently do not count toward earned income.