Ah, memories. Remember when Dems in Congress compromised with Rs earlier this year on unemployment? Instead of giving out extensions of unemployment benefits--bi-weekly payments that would actually help the jobless out for an additional 3 months--the Dems agreed to give away $600 checks to almost all tax-payers.
Real smart.
No checks have made it into my household yet, but when they do, I am thinking about giving mine away. It's very hard to imagine parting with $600. I have debt after all, and there's plenty of stuff I need, but...I didn't earn any of the money coming to me, and I don't need it or deserve it anywhere near as much as the 1/3 Philadelphians living in poverty.
What should I do with my $600?
I can spread it out and give it away to a few groups I like, or just pick one to have the most impact. Certainly PUP and ACORN and CLS who are all working directly with unemployed people and mortgage foreclosures are up there. Then there are larger political causes to fund, that might impact the balance of power for progressives in Harrisburg or DC. And there's a myriad of other causes that I support and would like to make a difference in.
Or I could keep some or all of it. I don't know about the rest of you, but there's a real temptation to keep the money, save it, or use it to pay down debt. Especially as a 29 yo, a part of me wants to save now, in the hopes of being able to be more financially secure in the future (and be able to help out my causes then). And I am lucky enough to have a pretty good job, but being able to pay my bills and eat every month without overdrawing my account is still a somewhat foreign concept.
What are other people doing with their checks and why? In the context of a totally unfair tax rebate, that our government has had to borrow to fund, shouldn't we take matters into our own hands somehow, and correct the mistake that the stimulus has been?
Well
My rebate check (along with my 2006 refund) is keeping me, my wife, and my son alive this summer, since my job fell through. So, I wouldn't say that I'm "keeping" it, but...
Well I avoid this hornets' nest for now
because I haven't filed yet. I need a husband. Or an accountant. Yeah, an accountant.
Nest eggs in jeapordy?
If I was a City employee I'd be looking at outside retirement plans:
http://money.cnn.com/2008/06/02/pf/retirement/vallejo.moneymag/index.htm...
Invest the money in government bonds
If you're concerned about the government's borrowing to fund the rebate check, then use the check to invest in government bonds. (Treasury bond funds are available through any mutual fund company, for instance.) Your decision to invest in government bonds will mean that your rebate will have net zero effect on the national savings rate, which is the reason to be concerned about the deficit in the first place.
Or, to achieve the same economic effect (but not as directly) use the money to pay off personal debts.
Baker on the need for a Green Stimulus
Ray is right, the stimulus was not well targeted. The extension of unemployment benefits is clearly the most cost effective stimulus and it wasn’t even in the bill. Just under a third of the stimulus money was earmarked for businesses. Sadly there isn’t much evidence that these measures in the thick of a recession actually stimulate business investment.
The economic evidence supporting the rebates was somewhat stronger although recently Dean Baker argued that the evidence in support of the last round of rebate checks was probably overstated in part by the housing bubble. He suggests that with housing prices rising rapidly in many places during the last recession homeowners felt secure enough to spend their rebate checks freely. Today of course the situation is reversed for homeowners and so many more people feel like Ray and are more inclined to save the money or pay down debts.
Economic stimulus is supposed to spur increased consumption of goods and services which in turn leads to increased production which reverses or at least slows job loss. Deciding to save the stimulus money or paying down debt with it doesn’t do that. That said if saving the money or paying down debt feels like the right thing to do, you should probably do that.
It is also important to remember that recessions are painful events for many people even those that don’t lose a job because incomes grow more slowly. So a recession is to be avoided or at least shortened. This means that long term issues of federal debt are separate from the short term need to spur a recovery. That said if you are going to run up the national debt you should spend the borrowed funds effectively which means targeting the money at measures which are most likely to spur spending which the stimulus package didn’t do well.
Dean is pushing a second stimulus package this time targeted at the right kinds of measures. Here he is in his own words:
--Mark Price
Taking a class
As I am looking into graduate work in Econ but don't have enough math in my background, I'm taking a Statistics Class online through CCP. So I guess I am consuming, and I'm putting it into one of the institutions that serve low-income folks in Philadelphia. Not that I'm trying to pretend it was a high minded decision. I just wanted to take some math in the most cost-effective and convenient way possible, and CCP seemed to be it. The Stimulus Check will pretty much cover the course ($13 shy).
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This Too Will Pass, for the guts in your cerebrum.