As President Bush proposes, his emergency economic stimulus plan will put $150 billion dollars into the economy. This plan, similar to other Bush Administration stimulus plans, will have its success and impact hinged on what Americans do best, spend money.
For over a week, Washington has been working around the clock to work out the details of the Bush plan. The driving force behind the plan and heavy congress attention has been the continued and worsening economic forecast. Finally, with all this work by Congress, and if the plan gets a full approval by Congress, individual Americans can get up to $600, working couples $1200 and those who have children will get another $300 per child.
President Bush and the leaders of Congress hope that people will spend those rebates on ipods, computers, flat screen televisions and vacations. The move is hoped to help revive an economy sagging from bad mortgage lending and a lack of confidence in the stock market.
There is a concern that the spending habits of people have changed. Most Americans have been used to tapping into their home equity lines. As home prices have tumbled, that option has gone away for most. Many may be tempted to save the money rather than spend it.
What Can I Do With My Rebate?
So many consumers like Richard Yanez of Phoenix, may put the money into a savings account or use it to pay down debt instead of putting it back into the economy. The 47 year old grocery manager said that he would rather pay down his debt rather than go on a spending spree. He said that he and his wife could get up to $1500 back in rebate money. I know that for myself I would like to invest it. Now that the stock market is down, I would not mind picking up some good buys on Wall Street.
The National Foundation for Credit Counseling urged consumers to use the money they get to pay down their consumer debt, pay off collections or make home repairs that might cut down on future energy bills. The Bush Stimulus Package is not a done deal yet. It has already been approved by Bush and the leaders in the House. Next, it goes to the House of Representatives house floor for a full approval sometime next week. After that it will go to the Senate. Democrats are already saying that they would try to amend it.
Consumer spending accounts for roughly 70% of the US economy. Putting money in the hands of American consumers is an easy way to boost economic output in the short run.
Steve Fazzari, a professor of economics at Washington University in St. Louis thinks that the Bush Stimulus Package will have a positive effect on the economy. He does not feel that it will be enough to avoid a recession. The rebate is not likely to cause the kind of broad economic resurgence that happened after the recession of 2001. He expects to see some spending from the rebates. He expects that consumers will spend their rebates because consumers are in a tough financial situation right now. The statistics from the 2001 stimulus package was that 70% of the money was spent within 6 months.
The 52 inch flat screen I have my eye on is going to cost more than the $1200 my wife and I are going to receive. I am always a fan of saving versus spending. My advice, put the money in the bank. I did not get to be Debt Free Dave by doing a lot of spending.
Debt Free Dave has been in the mortgage and consumer finance business for over 10 years. He has a Finance and Real Estate degree from the University of Arizona.
This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
(New site)