Rebate Ain't So Great

ROCHESTER - Like most Americans, I find myself strapped for cash almost constantly. I own a mortgage, uh, I mean house, so that is the big reason, but credit cards, utilities and that pesky food stuff all put a ding in the Benjamins (or the Washingtons in my case). Needless to say, I can use the loot if Bush and Congresss want to give us rebate checks. But does this really do anything? We are facing a recession, will spending $600 fix that? Did shopping defeat the terrorists after 9/11? I think not. I am no economist, but recessions tend not to happen over night. Therefore, they tend not to be fixed over night. Bush wants us to get the money and spend it to give the economy a boost. I think there are three main scenarios here: best case, worst case, and likely case.

Best Case
The best case for Bush is that we all go and spend our 'free' money. I assume he wants us to spend it on goods (as opposed to services) for full effect. Let us assume we get our checks on a Friday and we all spend them on a Saturday. If we all get our checks on the same Friday, retail spikes on one Saturday, and then we all go back to being broke and buying nothing. This only delays the recession. Of course, we will probably get our checks at different times. This will minimize the spike, spreading it out over a matter of weeks or months. Again, this will only delay the inevitable.

Worst Case
The worst case for Bush is that we all save our 'free' money. People saving money instead of spending it is why Reaganomics (trickle down economics) doesn't work. Wealthier people tend to save more, which is why they are wealthier. So if we are all smart and show restraint, we put the money in the bank and collect some interest off it. This does nothing for the economy and it goes directly to recession.

Likely Case
The reality is somewhere in between. The folks who should be saving the money will spend it, and the folks who could be spending it will save it. We will see a small spike in the economy and some of our friends will have some cool new stuff. The recession will be delayed until fall and we will all have buyer's remorse when we can't pay our bills in October.

In summary, telling people to spend a couple of hundred bucks is nothing more than a delay tactic. It is the equivalent of using the defibrillator paddles on a guy that just had a massive heart attack. It may help the short run, but it can't make up for a huge underlying problem. As usual, we Americans prefer to take the short cut and ignore the big picture. My advice? Hell yeah cash the check. Just don't spend it. The recession is coming, sooner or later, and the money might be more useful down the road.