I'm stuck at home today because the weather forced the local school district to close, and my seven year old can't stay at home by himself. As a single parent, I feel like I struggle to stay one step ahead financially. Losing yet another day of work due to school closures and weather sucks. Regardless of the fact that he wasn't in school because the district was closed, I still have to pay for two days of before/after school care to the school district. If I had gone to work yesterday and today, I would have had to - after finding someone - pay that person to keep him all day on top of the already paid before/after school expenses. It's a catch-22 that many parents get caught in and left struggling to handle.
That said, I can appreciate an unexpected windfall, such as the anticipated rebate checks from the government. According to the latest Google News article, I could expected to receive $600 for myself and $300 for my son. This would go a long way in making a dent into the $2300 I am trying to save up for summer child care. The government is counting on us spending it as soon as possible to stimulate the economy. It worked in 2001, when many received $300-600 rebates. So more is better right?
But before you start planning to spend it right now, it looks like we won't receive those checks until at least June 2008. The relief isn't immediate. And if we are really headed into a recession, blowing that money on a new HDTV or car could be the worst thing. If you've never heard of Suze Orman, she gives financial advice to the masses. Her latest column makes some recommendations on what would be in the average person's best interest: save it (add to your emergency fund), invest it (savings, CD or other) or use it to pay down debt (like credit cards!). In other words, we all fear going into a recession so don't spend money like you're wealthy and we're living the high life. Make smart decisions now that will make the difference later.
Regardless of what you may think of the rebate checks (or whether it's really a rebate or just an advance), hopefully what I have said here will help you reconsider how you were going to use your rebate check.
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The point of going out and spending it is to avoid going into the recession. An economy goes into a recession when people don't buy the goods and services that the providers made. Therefore, they have to cut back their production, which usually means cutting back labor (read - layoffs, downsizing, merging, etc). Cutting back labor, of course, means fewer people working (as well as more people worried about getting laid off themselves), which means fewer people spending.
The idea of the rebate checks from the government is to encourage people to spend to help stop the cycle of recession. The problem is, though, is that a lot of people believe that the government giving people money like this is weakening the US dollar, which will put us into a recession even faster. They end up saving the money or using it for other things, which ends up in resulting in the continuing downward spiral toward recession or even a depression. Would the government's plan work if everyone spent that money? I'm not sure, to be honest. I think it might mitigate the problem, but it's still ultimately a band-aid on a larger issue.
-- quis custodiet ipsos custodes?