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Economic Package Fails to Excite

Written By Brian Hicks

Posted January 24, 2008


Like or not, the economic stimulus plan is one that can’t be stopped.

Of course, it’s rife with politics and is fatally flawed, but what else would you expect in an election year from this bunch. 

Yesterday Democratic and Republican congressional leaders reached a tentative deal on tax rebates of $300 to $1,200 per household and business tax cuts to "jolt" the slumping economy.

All told, the plan will cost U.S. taxpayers nearly another $150 billion in further deficit spending.

The hope is, of course, that with all of that "extra" money in their pockets the U.S. consumer will be able to ride to the rescue once again.

You know the drill—- it’s nothing but borrow and spend. 

So have at it America. Do your patriotic duty and head off the mall to spend more money you don’t really have.

The fate of the whole world is on your shoulders, you know.

But as it is often said, the best-laid plans of mice and men often go awry. And this time it might not be any different.

Here’s why.  A growing number of people may decide to step off of the rat wheel this go round.

From the Star Tribune by H.J. Cummings entitled: Are American consumers too strapped to spend?

"With a sharp drop in interest rates and talk of tax rebates, consumers who have shopped and propped up the economy are expected to keep on buying. That might not be realistic anymore.

With Tuesday’s announcement of the steepest interest rate cut in more than two decades and President Bush and congressional leaders showing rare unity working on a tax rebate that could reach $1,600 for couples, U.S. officials hope a little extra cash in everyone’s pocket will quickly pass through to the nation’s struggling economy. Consumer spending accounts for 70 percent of the domestic economy.

Many U.S. consumers are tapped out — over-mortgaged and over-borrowed with no savings to fall back on. The homes that helped finance their spending sprees are now falling in value, and higher food and energy costs are digging deeper into their wallets daily. Increasingly, they’re falling behind on mortgage and car payments as well as credit card bills.

But there’s something more, and it’s new, said Jerrold Peterson, economics professor emeritus at the University of Minnesota at Duluth. It’s fear.

"For every one mortgage foreclosure there are four of us saying, ‘There but for the grace of God go I,’" Peterson said.

"As I see houses repossessed and home values go down and down, am I really going to want to buy an automobile, or even a whole lot of new clothes?"

"It’s too little too late," said William Schroyer, a tree trimmer for the city of Minneapolis. "The ideas that consumers can spend our way out of this is ridiculous."

At least some economists now agree with them. "All of a rebate won’t go to spending," said Robert Hammer, CEO of R.K. Hammer, an investment banking company in Los Angeles. ‘There will be some, but others will put it in savings for a rainy day, or pay down bills they otherwise couldn’t have.’ "


So in short, so much of it could all end up as just more money down the rat hole.

But hey, who’s counting. It’s only the equivalent of 150,000 million dollar bills if there were such a thing.

That’s nothing compared to the 53 million million dollar bills that we’ve already managed to heap on the backs of future generations.

It’s madness, I tell you.