Economic Stimulus Not as Stimulating as Hoped
By Randall | June 2nd, 2008 | Category: Government, Personal Finance | 6 comments 443 views | 6 Comments » |
With Pres. Bush’s economic stimulus package having wound it’s way into the majority of people’s hands this last month, the numbers aren’t looking so good for a kick-start to our stalled economy.
Last month’s economic numbers show that consumer spending is DOWN .2%. That means that all that wonderful money given to us by the government didn’t see it’s way back into the economy through purchases, as the Pres./government had hoped it would. I’m betting that either a lot more people are pessimistic on the economy, and are saving for a rainy day, or they’re tired of consumer debt, and used the stimulus to pay down their outstanding credit debt.
Either way, it doesn’t bode well.
Reverse Psychology
As we know, the idea of the stimulus money was to kick up the economy by having people spend that money on consumer goods, and thus increasing demand and sales for products. But with the economy showing no signs of taking off, a lot of people are scared, and have decided to do the OPPOSITE of what was supposed to happen; Save and pay off debt.
Strangely enough, this completely eliminates the usefulness of this government handout. It doesn’t ’stimulate’ anything, since the money goes directly into banks (through investment/savings) or to banks (via paying down loans/debt). I see this as a clear win for banks. But even with the banks coming out ahead, the AMOUNT of money that they are getting isn’t enough to be a blip on the radar.
You Irresponsible Taxpayer You!
I’m not sure why they actually thought this package would do anything more than any of the other stimulus packages we’ve had over the years. None of them had any noticeable effect of bolstering a lagging economy, so why should this one be any different?
Maybe it’s pessimistic of me, but I think it happened as a knee-jerk reaction by a lame-duck president wanting to gain some popularity. Nothing against that, but it turns out to be too little too late. Some pre-emptive work would have had more wide-ranging impact, rather than a one-time check to families ALREADY in the depths of a recession.
What’s Next?
There are continuing rumors of a second stimulus package that might come about someday. But since this one had all the impact of a snowball on a hot June day, I’m not holding my breath.
Maybe if we stopped spending on some other huge drain on the economy, we might have more money for infrastructure and economic building measures. I’ll leave it up to the readers to make the conclusion on what I’m suggesting.
What would YOU do to spur our economy ahead? Leave us your suggestions!
I think the numbers for June will be more telling. By the end of the month the majority of Americans should have received their check. During the last rebate in 2001 I think most of the money was spent over 4 months.
I also don’t blame President Bush for the stimulus package. Congress totally shares responsibility for the package (and any failure (or success) that results). I watched some of the sessions on C-Span when congress was debating the package and you would have been surprised at all the extra things that they were trying to add. The package was getting delayed and Pres. Bush said to stop adding extra stuff so that they rebates could be sent out. So while I don’t feel 100% sure the stimulus package was the right thing to do, Pres. Bush made sure it wasn’t bigger than necessary by telling the senators and reps no pork barrel spending.
Erins last blog post..Help the Frugal Failure (Pretty Please with a Cherry on Top?)
Some people are really bemoaning the fact that people aren’t actually spending the money from the stimulus package. They are worried since people are saving it or paying off debts. If you took the time to think about what is actually happening, you would see that it’s not so bad after all. The stimulus plan was $168 billion. Estimates I’ve heard say that greater than 1/2 the people are using it to pay down debt or saving it. Let’s say 55% do that, and half pay down debt and half save it. Ok, 55% of $168 billion is $92.4 billion and half of that is $46.2 billion. That means there is $46.2 billion less debt now, and $46.2 billion more savings. This country NEEDS a higher savings rate and a lower debt load. I think anyone can see this is not actually a bad thing that is happening. Now, I understand it wasn’t what they intended it to be used for, but we Americans will use it for what we think is best, and this time, we think it’s best to save or pay off debt.
@Erin, I don’t blame Pres. Bush for it either (there’s LOTS of other things to blame him for) but a one-time $600/person isn’t enough to change anyone’s life significantly. Pork spending is just what it is, no matter what bill is passing through congress. Politics as usual.
@Chris, Couldn’t agree more. It’s good for the American people to save and get rid of debt, but not so good for the economy that was hoping for a ’shot-in-the-arm’ from the extra money. It might still help, but current indicators are not showing massive in-fluxes of cash into the consumer product sector. Good for savers/debt-eliminators, status quo for the economy.
True, very true Randall.
I think what bothers me most about the stimulus package is that the govt. had to borrow money from China in order to pay for it.
I heard rumors of a 2nd stimulus package and honestly I hope that never passes.
Erins last blog post..Help the Frugal Failure (Pretty Please with a Cherry on Top?)
I used half of it to pay of my last CC bill and the other half we spent on various things. A patio door was a big bit of it.
I was going to save it, But I have a regular savings schedule so this will just make it easier.
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It’s too early to say whether or not the stimulus package was successful in bolstering the economy. One thing that I’m sure it did bolster is consumer confidence. I took my stimulus check and paid off a credit card. Good for me. Now instead of worrying about that credit card next month, I can maybe get my nails done. Frivolous spending because I feel good about it.