As we’ve all heard about by now, most of us should be receiving checks in the mail throughout the summer, courtesy of Uncle Sam.
The downturn of the American economy has prompted every Presidential contender, and every member of Congress to be the first to present a plan to save ourselves from recession.
Lucky for us, they reached an agreement… and we all get some extra money.
Our good friends in Washington, bless their hearts, seem to believe that this stimulus package will prompt folks like you and me to rush out to Wal-Mart (or, preferably Costco or Target), and buy a new flat-screen television.
The idea, of course, is that we consumers will use the money to consume! This consumption presumably leads to an increase in demand, and in turn leads to more production, etc. etc… a domino-effect of rising GDP and increasing stock prices. Fun for all.
Before I go further, let me tell you how my wife and I plan on using our $1200 check. We are going to use it to help accelerate paying off our credit card debt (which isn’t all that high, just so you know).
My wife and I are not alone. Consumer credit rose $5.2 billion in February of this year.
An estimated 115 million Americans carry a monthly balance on a credit card, according to a PBS/New York Times documentary from 2004-2005 (which has undoubtedly increased in recent years).
The average family credit balance, according to that same program, is $8000. Keep in mind, that that total more than doubled in just 10 years. That was 4 years ago. And we all know things have gotten worse since then.
So, where does this stimulus package get us? If my suspicions are correct, most recipients of this government check are doing the same thing as my wife and I: paying off something we’ve already consumed.
The point of all of this, is that the politicians in Washington don’t seem to “get it.” The so-called “stimulus” amounts to nothing more than a temporary fix at best, and a government subsidized debt payment at worst. I won’t complain about having $1200 to use to pay off some debt, but the cost of that will come with rising prices elsewhere (since the government is borrowing the money to pay for the stimulus package to begin with).
Solutions? In my mind, if our elected officials really want to help, they should turn their focus toward long-term fixes. Perhaps a starting point would be to actually do something about the predatory practices of credit card companies (watch that PBS video). Maybe we should start with putting a limit on the rate of interest banks can charge for a credit card balance. Wouldn’t that do more good in the long-run than the current borrow-and-patch policy from our “leaders?”
Currently, the right to regulate credit interest rates resides with state governments. But the right of one state really has no bearing on what another state will allow. For instance, if Missouri were to regulate the rate at, say, 12%... as long as another state allows for a rate of 30%, that credit card company can set up shop in the 30% state, and effectively export that rate of credit wherever it wants. No joke. What difference do state's rights make when another state can effectively over-ride another's regulatory power?
Recently, there was a congressional hearing on a Credit Cardholders Bill of Rights. A number of issues were touched on... all of which seem to be good starting points.
What do you think? Taking your calls, starting now…
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8 comments:
The greatest and only true solution to comsumer credit card debt is consumer restraint. Credit card companies can only charge and make money off of people who have chosen to use the credit cards in the first place. I don't believe there is a single credit card company that actually purchase things for the consumer. The American people have an "I want it, I will get it now and worry about paying for it later" attitude. For the most part, people refuse to live within their means. They all have computers, cell phones and many other luxuries that are absolutely not necessary to survive. And now you want the Government to step in, once again, and protect us from ourselves? Credit card companies can only exist if the consumer chooses to use them. Grow up America, get a grip and take responsibility for yourselves.
I enjoy free money as much as the next guy, but it's putting a band-aid on a bullet wound. Those that don't use the check to pay down some debt will likely see it go right into their gas tank. With a gallon of regular hovering at $4, it's very hard to believe the free market is responsible. Credit card companies vs. oil companies... which is more evil?
I feel like the stimulus package is the equivalent of giving someone a thimble full of rocket fuel for their jet pack. "Yippeeeee!! I'm flyyyii...oh ok I'm done and back down to Earth." I understand the idea behind it. Give people money and we boost the economy for a bit. Makes sense right? Until you realize the for a bit part. What good will this do beyond just making a tiny spike up in an economy thats headed down towards a recession?
And maybe it's just me, but I feel like the consumers who should be spending will be the ones who use it to pay off debts will put the money away for a rainy day. And the those who should be saving or paying off debts, ie. low-income individuals or families, will probably be the ones going out and getting those flat screen TVs.
Our country got into this horrid state of affairs through a mortgage/lending crisis, which then lead to a full scale credit crisis. I just do not understand how giving everyone a relatively small amount of free money will be any kind of a solution to these problems. The people who are really suffering right now aren't a few grand in debt. They're hundreds of thousands of dollars in debt from mortgages they can't pay. Mortgages they shouldn't have gotten. And if all of your money is being used to pay off just the interest on your mortgage, seeing how rates just skyrocketed, then how else do you pay for the things you need? That's right, credit cards!
Well, fast forward and here we are. Houses are being foreclosed at record rates and bankruptcies have doubled. Banks are suffering and the more they do, the less likely they want to help out people in debt. Banks right now are taking houses rather than working with people to pay off their loans.
So giving $600 to everyone is supposed to help huh? No. I say getting the banks back on their feet is what will help. Help the lenders so that in turn they can help the homeowners and maybe, just maybe get the housing market back on solid ground.
And then the government can go ahead and give me some free money. :)
While I appreciate what the government is trying to do, I too believe it is much too little, much too late to head off a recession.
Let me preface this with I accept that a recession is not always a bad thing.
What I don't understand is we are running a vast deficit, the amount of money being brought in is not able to cover the current expenses. So why send out even more money in the hopes of stimulating the economy?
As others have stated, I am using my $1800 (two kids) on things I have already purchased.
But I have to be honest, and I say this as a reformed independent conservative, two time Bush voter who would be willing to go toe to toe in a debate with any conservative, I would rather my money remained in the hands of the government to support our men and women in the armed forces.
Last summer I lost a dear friend of mine to an IUD in Iraq. Before he left for Iraq, Lt. Dan had to purchase his own body armor with money he received from his college graduation.
Now I know many people who I used to listen to will tell you the troops don't want it, they don't need it, they have all the supplies they need and anything they want is provided.
But I can tell you that's not the truth. The truth is while you and I are cashing our checks, our true heroes on the front lines are saving up to buy the equipment they need.
This is inexcusable.
If they don't want to support our men and women on the front lines with body armor, or vehicles that can withstand an IUD unlike our current humvees, then maybe they should seriously consider ending this little nation building exercise as we are no longer at war with any discernable enemy in Iraq, and let the Iraqis rebuild their own country with their oil revenues that they are currently stockpiling.
Finally, I hope the price of gas continues to soar. I want this to remain an issue, I want it to remain in the spotlight. If it drops again, people will go back to their old ways of consume, consume, consume.
I'd rather see them use the stimulus money on something constructive, like a mandate for a hydrogen pump on every corner gas station by 2010. That way when people like myself have said enough with gas and oil and 80% imported crap that funds the people who want to kill us, we have an option.
I love the hydrogen commercials, but it represents the cart in front of the horse. I can't drive what I can't fuel. And so far, I can't find my hydrogen pump.
There is little doubt this Country has problems. But I also believe with the right attitude, innovation, discussion, and leadership, this generation can go a long way in fixing these problems.
I look forward to the discussions, the debates, and hopefully this forum will provide the mechanism for each of us to learn from one another and be inspired to make this Country reach its full potential.
I'm with you, Andrew- I might go make a small purchase, but this money is going straight into savings or bills. The biggest problem is, it is addressing NONE of the systemic problems that put us into this godawful mess- i.e. gas or massive home debt, like Matt and Ken pointed out. So I guess we'll just twist in the wind in the meantime, but by God, at least we'll do it with a new flat screen!
And Jim, you brought up some really fantastic points that simply must be explored further in this forum. We'll be doing that; count on it.
My condolences over your friend. You are exactly right, it is inexcusable. Thank you for this input.
You stated:
The point of all of this, is that the politicians in Washington don’t seem to “get it.” The so-called “stimulus” amounts to nothing more than a temporary fix at best, and a government subsidized debt payment at worst.
Unfortunately, it is not that politicians don't "get it", but rather their constituents don't get it. The politicians understand it all too well. From the cynical point of view politicians are in it for the power, and keeping the ignorant masses in their pocket gives them it. From a more idealistic point of view, the politicians need to do these highly visible tactics to please the ignorant masses in order to make more meaningful legislation in the future.
In both scenarios there is one thing constant: the ignorant masses. The constituents are the ones that need to wake up and realize that short-term fixes are not good for us. It is a vicious cycle- ill informed/apathetic voters vote in someone, that person (who wants to keep the job) does things that make the voters continue to vote again. However, it is the politicians that are dependent on the voters, not the other way around. So any politician that says "NO!, I will not pass frivolous legislation that only appears to help" will quickly find him/herself quickly out of office next term
So, until the voters start saying we want viable solutions, not pandering, there the politicians have no choice but to give us the 1500 dollar refund check.
A NEWSWEEK article gives a good rundown of why the rebate is not likely to actually do much good for families.
You can find it here:
http://www.newsweek.com/id/139100
http://news.yahoo.com/s/ap/20080611/ap_on_el_pr/obama_lending
Check it out! Nice to see at least one of the candidates has this on his radar.
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