So, naturally, I was pleased as punch last week when my household’s economic stimulus payment from Uncle Sam splashed into our bank account.
It seemed so simple.
Would you like $1,800?
Why, yes I would.
Ka-ching.
Thank you very much.
Thus ends the simple part. Now things get knottier. What should we do with our little windfall?
U.S. Treasury Secretary Hank Paulson has a modest suggestion. He’d like to see us spend it — quickly — before the wobbly economy officially tilts into recession. He almost makes it sound like our patriotic duty.
Paulson was in town the other day for a photo op to mark the printing of an expected 88 million rebate checks that will be mailed over the next few weeks. Another 44 million payments are being delivered via direct deposit.
All told, more than $100 billion is being delivered to American households, part of a larger $150 billion-plus stimulus package that also includes tax breaks for businesses.
At roughly 1 percent of annual gross domestic product, the stimulus package will make a “real difference” in the broader economy, Paulson believes.
He’s hoping the stimulus package will lead to the creation of 500,000 jobs yet this year that would otherwise not exist. He’s hoping it’s enough to help skirt recession — always a good idea, particularly in an election year.
He also left little doubt about what he’d like us to do with our newfound money.
“Giving people cash means they can decide how best to use it,” Paulson said. “Seniors, veterans, moms, dads and grandparents can each put their payments toward what is important to them — whether it’s gas for a summer vacation, clothes for back to school, or a trip to see the grandkids.”
I, for one, couldn’t help but notice that every specific example cited by Paulson involves dropping the stimulus payment like a hot potato into someone else’s cash register.
Indeed, there wasn’t one word in three pages of Paulson’s prepared remarks specifically suggesting that Americans use their windfall to pay existing debts, save it or — perish the thought — put it to work in a way that would make it grow over time.
Apparently, that’s just not the American way. After all, we’re the supposedly rich country with the negative savings rate.
Now, Paulson’s no dummy. He made his bones running the Goldman Sachs investment banking firm — arguably the sharpest house on Wall Street, smart enough to sell subprime mortgages short before the meltdown, making a mint in the process — before becoming treasury secretary.
He acknowledged in passing research suggesting that between one-third and two-thirds of previous economic stimulus programs in 2001 and 2003 went quickly into consumer spending. But he didn’t mention where the rest of the money went.
Apparently, that’s my job. So here’s a little friendly advice.
If you’re among the many folks living paycheck to paycheck, use the money to keep up with recurring bills. I’m sorry you’re in such a tight spot. Good luck increasing your income or reducing your outflow.
If you’re keeping up with basic bills and have existing credit card balances, use the rebate money to reduce or eliminate the balance. In many instances, that’s an immediate return that can run upward of 20 percent on the money — and that’s hard to beat in the marketplace today.
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