The Economic Reality Behind the Administration's Stimulus Plan

Dismal is a word that comes to mind when I think of the economy. It is not that I am an economist, and I have interpreted all of the data to come to my own conclusions. I am a product consumer and I feel that my money isn't stretching as far as it used to. I am also a media consumer and the news and talk shows certainly are not sending a good message out to their audiences. Since the beginning of 2008, the stock market (where a big chunk of my retirement is) has gone crazy, the price of gas is out of control, and milk is just really expensive.

Will we make it through this crisis? President Bush, his administration, and the House and Senate have a plan to stimulate the economy with tax rebates for people who are working and paying taxes. These tax rebates, ranging in amounts from $300 to $1200 per person, are supposed to infuse the economy with cash by increasing spending, (or savings) and help stimulate the economy.

Will it help? To be honest, I am not sure, but I am positive the money will be spent. In a recent survey by the Consumer Federation of America and Wachovia Corporation, there were some very scary statistics unveiled about American spending and saving habits. Here are some of the highlights:

• 42% of survey participants said that they weren't saving because credit was so easy to acquire.

• 37% said that impulse spending made it difficult to save.

• 29% said that it made them feel good to spend

• 20% of participants blamed social pressure for overspending [under-saving].

• 15% stated that trips to the mall and shopping caused more debt.

• 8% blamed a lack of savings on playing the lottery and gambling.

This profile fits my family. I know we don't always save up for large purchases, because we can "charge-it" instead. I also know that impulse spending, especially during this last holiday season, drove us deeper into debt. The Consumer Federation of America has it right.

It seems that the Administration has read this report as well. They are assuming (or betting billions of dollars) that when people get their rebate check, they will spend it. The data supports their bet. As the Consumer Federation of America and Wachovia Corporation have found, the odds are not good that Americans will save that money.

I have already discussed with my family where the money is going if and when we get it. And yes, we are spending it. We are planning a spring break trip, and that money will make it possible for us to afford the trip without going deeper into debt.

We will be doing our part to buoy the economy by buying expensive gas and price inflated milk so that we can enjoy ourselves. For a little bit, the extra money will help us forget how dismal the economy is. If that isn't economic stimulus, I don't know what is.