Sunday, March 16, 2008

A less than Stimulating Stimulus

From the Phoenix Business Journal, they are running a reader poll on what people intend to do with their stimulus rebate.

From the web site:

Rebate spending

How will you spend your stimulus rebate? Please add comments below.

Buy luxuries

Buy necessities

Save it

Pay down debt


Check out reader comments
This poll is not a scientific sampling, but offers a quick view of what readers are thinking

Note that 60% say that they will basically save it. No this isn't a reliable sample, but it illustrates a point economists have been making about one time tax rebates. To send us the rebate, the government is going to borrow the money in the financial market. In turn, 60% of us will put it right back into the financial market by either paying down debt (personal borrowing from the financial market) or saving it. If the 60% number is anywhere near correct, the majority of the stimulus will merely change the ownership of the debt rather than increase spending (and stimulate the economy.) In short, the stimulative effect of this kind of rebate is minimal.

Not that I'm going to turn down the money...



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