If you said the words “Stimulus Package” 3-4 years ago most people would have thought you were talking about a prescription for Viagra. Different these words are in 2009, as it means, how they can tease the consumer to spend beyond their means again and stay in debt. There’s no doubt the economy is in trouble and something must be done, the question is how much it will take to make America feel comfortable to start spending again. This concept seems backwards but they say it works. Imagine, we got into trouble from overspending and over borrowing and when we finally start to control our personal budgets it sends our economy into recession. Purely- the global economy needs to operate on less money, as the inflated spending dollars of the past have vanished.
The new plan of giving tax cuts to all to the tune of about $500 per taxpayer is supposed to help spark a start of the recovery out of recession. Let me understand, if I receive this $500 and spend $500 it helps out, if I save the $500 or pay down past credit it doesn’t. What am I to do with this money- help the economy or help myself? You see no different than any tax rebate in the past, many people will spend the tax return 2 fold before it reaches their wallet. But what happens if Americans really have changed their spending habits and put the money in a savings account or pay off a past bill? This does nothing for the economy because it hasn’t moved one retail product off of the store shelves or sold one more car or house.
I think most agree the cost of living must come down before we can commit to spending and borrowing again. If consumers fell short of cash during the booming economy of the past, they certainly can’t afford more now until the cost of living drops. As for the family looking to purchase a home, the $500 doesn’t make or break the deal. The interest rates, local real estate taxes, health insurance costs, college costs, auto insurance, utility expenses are what stops the prospective buyer because the consumer is tapped out.
I am not against the proposed stimulus package, as anything is better than nothing. But a sparse spreading of bird seed over America will hardly reach the ground to keep employment from increasing or stop foreclosures. Americans need a lower cost of living to survive and catch up on debt. Similar as in the 1950’s when VA home mortgages were available, an American could buy a new home with no money down and at a very low interest cost so not only could they move into that new house but they would be able to afford it for the years ahead. Incentives must be made available to the prime earners in our country so they can afford to stay housed and keep debt under control.
Remember the recent bail out stimulus package for the auto industry. Ask GM if they have sold more cars since they received the funds or have they drastically lowered the price to the buyers to move out surplus inventory. I think you will find GM paid down past debt and sales have continued to fall. Remember there is still a balance of about $350billion to give to the automakers and you can bet GM’s hands will be out again by the end of March.