Recession & the Stimulus Package

Money, money, money
Always sunny
In the rich mans world (ABBA)

I'm getting really annoyed by all the talk of a recession and the importance of stimulating the economy by boosting consumer spending. It seems that the Administration and Congress intend pursue a $140-$145 billion stimulus package that will provide a "timely, targeted and temporary" response to our slowing economic growth. Funneling this money directly to the American people, through rebates, an extension of unemployment benefits, and tax perks for business, is intended to get money in the hands of consumers within the next year to help boost economic activity and in the near term, banish fears of a recession.

Although I certainly lack knowledge of economics (macro was a breeze, but micro was a killer!), it seems to me that this method of rescuing the economy seems senseless. I understand the importance of the rebates particularly for low-income and middle-income individuals (perhaps, $800) and households (perhaps, $1,600). Many folks are struggling to provide food, shelter and heat for their families. But the likeliness that such rebates are funneled into non-essential consumer items like Plasma TVs, new wardrobes, landscaping, etc. is high. I don't necessarily have a problem which such consumption but to have national leaders encouraging consumer spending is troublesome.

As was noted in the media regarding consumer spending during the holidays, spending was up but so was the amount of consumer debt. So, people are encouraged to spend money to keep the economic going (yay!), but they are using money that they don't have (boo!). This sort of debt--not slowed growth--is what seems to make the U.S. economy the most vulnerable, at least in teh short term.

I follow (75% of the time) the tradition of saving money for a rainy day--it distinctly follows the Depression-era mentality that my grandmother and father held. And, I plan on being one of the few Americans who uses her rebate check for savings. I don't have any outstanding financial woes, so I see the rebate as a gift from the government not a a free-pass to go out a buy new clothes and furnishings (that I'll have to leave behind in less than a year if the Peace Corps accepts me), but as a gift to supplement my short-term and retirement savings—which though steady, aren't at all where I want them to be.

I urge folks to be mindful when they receive their rebate checks. I know that you've been fantasizing about owning an amazing [INSERT ITEM] for the past year, but might that money be better used for another purpose (savings, reducing debt, etc) even if only 10 percent of it?

I urge folks not to listen to the "spend more money" nonsense of our President and his cronies. I assure you that even if you don't spend (beyond your means), the economy will be just fine in the long term, and most of all, your own economic well-being will be in better shape.