thoughts on the stimulus package

Is the stimulus package that just got passed by the Senate a good thing for America? Will households spend most of the stimulus package or will they hold on to it lest the economy worsens?

if you know that you’re expecting a tax refund check from the IRS, plus a stimulus check, chances are, you’ll spend more money than if you weren’t expecting two checks from the IRS. That’s what happened to me last year. I knew that I was getting a tax refund plus a stimulus check and for a period of two months, I did more shopping than usual online and spent probably half of the balance on stuff I didn’t really need (at the time, I felt there was a “need”).

Some argue that people will just hold on to that money and not spend it, which is counter to the aim of the stimulus package. This was my view earlier in the week. However, my opinion changed when I thought of who would likely be the ones to hold on to their money, and who would be most likely to spend their stimulus checks. I think those who are either out of work or are very concerned that they will loseWeight Exercise their jobs soon or have been denied loans will either hold on to the money or spend it on necessities. The national unemployment rate is currently over 7 percent, so perhaps around 25-30% of the households will exhibit this behavior.

The rest (70% or so), I believe, will spend at least part of their stimulus package and it will primarily be this group that will help jump start the economy. And of course, the ones with all the wealth are least affected by the downturn, so they’ll continue to live lavishly I’m sure.

One thing that should be noted (and that hasn’t been discussed in the press) is that this is only the second stimulus package in the last how many years? And only the second time stimulus packages will have been distributed since the Internet went mainstream. Surely we have learned some things from last year and businesses will build on what they did well last year and learn from their mistakes in how they serve their customers with stimulus checks in tow. I think this year, we’ll see more businesses rolling out the door mat to incentivize customers to spend their entire stimulus check to get a large discount or major perk in return.

It’s interesting to see that Taiwan is trying to stimulate its economy by giving out stimulus vouchers that must be redeemed and cannot be held on to. Do you think the stimulus voucher model would work in the U.S.? Why or why not?