The economic slowdown has exposed the extremes that have defined Americans for years: too much debt, chronic spending and little savings.
The U.S. economy depends a great deal on consumer spending. Repeat after me: Consumption accounts for 70 percent of the $14.08 trillion U.S. economy.
To buy what we want, Americans have taken on massive amounts of debt. We have done so even as our savings have evaporated. No, check that: Even as we have blown it all.
Conventional wisdom says that when money get tight in the household budget, you tighten your belt. But many of us haven't done that. We've taken on more debt. We've charged things on credit cards. We've refinanced the mortgage — two, three, four times. All in the name of delaying that payback.
So along comes the President and Congress with an economic stimulus check for you. What the politicians, economists and Wall Street want you to do is to run to Best Buy (better yet, drive your Hummer there) and buy that plasma TV. Or hit the mall to buy those spring fashions at Macy's.
By doing that, you'll be priming the U.S. economy, helping it pull up from the slide that's been occurring.
In other words, they don't think you should use that check to pay down your debt, pay off a credit card, pay a little extra on your mortgage, or pay off your car loan.
Or worse, to start saving. Americans have become lousy savers. Would the country collapse if enough folks started shoveling that government gift coming sometime in May into a CD, money market or a retirement account? Even trickier, what if you were to take that $300, $600 or $1,200 that's promised and had your employer shift that amount into your 401(k) account, boosting your savings for retirement?
Why we'd be acting in our own self-interest rather than for the greater good.
Look, we're all in this leaky economy together. But is it unreasonable to believe that one way the nation can begin to strengthen its balance sheet is for individuals to start fixing their own household finances?
In a rare instance of generosity, the federal government is giving you the chance to do that. And the checks will soon be in the mail.
Comments (2)
Right on, Mike.
If everyone who gets a rebate check puts that money first toward knocking down expensive debt, we'll get out of this economic pickle. Pay off anything that costs you more than 4-5% in interest. (You should, over the long run, be able to earn more than that in the stock market)
Next, never buy anything on credit that you can't pay back fully in 2 months' time. Do not spend one cent of your rebate check on "wants". Plasma TVs, video games, expensive restaurants, are not needs, they're wants.
Finally, we as a society need to save for the future, not spend for today. It's time to let the Joneses drive off the cliff and stop trying to keep up with them. In fact, let's turn society around and make the Joneses keep up with the savers. See if you can save 15% of your pre-tax income this year. Let this check be a kickstart.
There are too many people who will reach the age of 70, will look at their empty bank account and will wonder why they need to keep working into their 80s as cane-wielding Wal Mart greeters. Save Your Money.
Posted by Johnny O | February 11, 2008 3:42 PM
Posted on February 11, 2008 15:42
What's more, there's other measures than just poor cash that might have helped more.
With energy prices biting more and more of the average American's wallet, wouldn't relief o some sort help with liquidity.
A little help with that gas and electric bill might mean more disposable income for middle class folks.
that check is likely headed for most people's energy bills from this winter.
Posted by Paul | February 11, 2008 2:01 PM
Posted on February 11, 2008 14:01