This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Monday, January 28, 2008

Stimulus plan

Posted by Matt

So, what does everyone think of the proposed economic stimulus plan? I'm torn.

On one hand, I'm certainly excited at the prospect of receiving a big, fat $1500 check later this year.

On the other hand, I find the idea very troubling. First of all, where is the government going to get all this money? Oh, right, we can just tack it on to the deficit, pushing it to nearly record-levels. I'm not an economist, so I can't really say whether that trying to forestall a possible recession is worth such drastic measures. But I do have an even more fundamental concern.

The benefit of the stimulus package is predicated on the assumption that Americans are going to run right out and spend most of the money. From the first article I linked to above:

Q: How likely are consumers to spend the money and help the economy?
A: Some will spend every penny and then some. Some will save it all. In 1975, people spent about 40 percent and saved the rest, according to the Federal Reserve. In 2001, people spent about 70 percent.

Also from the article:

Q: What's a smart financial move to make with this money?
A: Either pay down any credit card debt or save it for an emergency, said Ken Robinson, a Cleveland certified financial planner. "Most people don't have nearly enough saved for a rainy day."

Frugalizers know that planning ahead beats short-term fixes; now we just need to demonstrate that we know it to our government and hope that they pick up the lesson.

No comments: