You can tell it is an election year because there is talk of the government passing out another taxpayer-funded economic stimulus check. I mentioned a few weeks ago the possibility of receiving a second stimulus check, and it appears from recent rumblings in Washington that the prediction may come true. We used our payment to stimulate credit card companies, and add to our savings account, while others are now the proud owners of plasma televisions and iPhones.
Teaching a Man to Fish
A great article over at Moolanomy pointed out the similarities in giving additional stimulus checks and a famous Chinese proverb:
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”
I agree with Pinyo’s sentiments, and would add that by distributing two stimulus checks in the same year we are setting a bad precedent for rough economic times in the future. Imagine five years from now, after years of economic expansion, we hit another snag. Maybe this time it is the demise of the student loan industry, or maybe credit card debt finally reaches such epic proportion that borrowers en masse begin to struggle to meet minimum payments. Citizens will once again be clamoring for another stimulus check, citing 2008 as the year the “government” sent out two stimulus checks to “help the economy.”
Save One, Spend One
Full statistics are not yet available, but I would suspect a large percentage of households put the first economic stimulus check in savings accounts. Many others probably used the check for debt repayment. I personally find nothing unpatriotic about either one of these plans. However, it was the hope of most politicians that recipients would take the checks and spend, spend, spend. What they failed to count on was a majority of the citizenry is up to their eyeballs in debt, and without a dime in savings.
There were a few other factors that contributed to foiling politicians’ plans for increased consumer spending. Rising gas and food prices ate up a large chunk of stimulus payments, reducing what people were willing to spend towards a television or new clothes. The real estate debacle also spooked many homeowners, who decided to toss the check in their emergency fund as a hedge against future problems meeting their mortgage payments.
Perhaps a second stimulus payment would spur economic spending, but I’d rather “the invisible hand” allow this to happen naturally, and without the artificial inflation of disposable income from yet another economic stimulus check.