I’m no economist, and normally I don’t stray into the murky water of politics in this blog (I get into enough trouble writing about theology, mysticism and contemplative prayer), but on a purely intuitive level I feel like saying something about the so-called rebate checks that we middle class Americans are about to receive from our government, in anxious response to the fact that we have a stalling economy during an election year.
I am reminded that the last time we got such checks — in 2001, shortly after our current president took office. They amounted to a squandering of our budget surplus, which if I am correct was the first such surplus in many years. Within months of receiving these checks, our country suffered its worst major incident of terrorist activity in history and in response we hurled ourselves into two misguided and very costly wars. So much for the budget surplus. So the last time we got “refunds” from the government, it was like partying with a bonus check right before getting laid off.
But this time it’s even worse. As commentator Andrew Samwick said on Marketplace the other night, let’s call this “stimulus package” by it’s real name: deficit spending. Samwick notes that the chief cause of the current financial mess was bad loan practices in terms of sub-prime mortgages, so why are we using more borrowed money in an attempt to clean up the mess?
Particularly when the money is not going to those who most need it, but rather those most likely to vote.
I know the idea is to spend the money to get the economy revving again, but frankly, it feels like using a new credit card because the old one is maxed out. So allow me to be unpatriotic and suggest that we should save this money and not spend it.
Here’s what I propose Americans should do with their rebate checks:
- If you owe back taxes, send the money right back to Uncle Sam. Therefore the “rebate” essentially cancels itself out, but at least your personal liability will be lightened.
- If you don’t owe Uncle Sam, but you do have unpaid credit card balances, do the right thing and pay down your debt. The single worst thing consumers do to themselves financially is carry balances on credit cards. And what is the US average credit card debt per household? (This particular website suggests that in 2003 households with credit cards had an average debt of over nine thousand dollars). Granted, the rebate checks won’t come anywhere near wiping out that oppressive burden, but if you’re as old-fashioned as I am and believe that being debt-free is a good thing, then reducing your CC burden — even by just $600 — is not only patriotic, but spiritually wise.
- If you are blessed with no consumer debt, consider using your rebate check to pay down either your car loans or your mortgage. Sure, you won’t benefit in the short term, but it does help you out over the long haul.
- One very smart place to put the check is in an IRA account. Most Americans are underprepared for retirement. In fact, don’t just send this check to your IRA — also make a commitment to continue putting as much as you can toward retirement. It’s the right thing to do, and your future-you will thank the today-you for your discipline and foresight.
- If your retirement portfolio looks great and you don’t have any debt, then the patriotic thing to do would be to burn your rebate check. But perhaps an even more spiritually proper thing to do would be to donate it to an agency that serves the poor. Of course, probably only an infinitesimally small fraction of people who receive these checks will have no personal debt and be truly well-planned for retirement…
- And finally: if you absolutely insist on spending this money — not using it to pay off debt, save for the future, or help those needier than yourself: may I humbly suggest that you invest the money in ways that will pay back, such as using it for maintenance on your home? Please don’t just buy things that will eventually end up in the landfill somewhere.
I know, I’m not being very patriotic, and if everyone did what I suggest, our economic doldrums might just lumber on. But I have this stubborn notion that less debt is better than more debt, and that it would be better to have a slower economy where fewer people had iPhones but more people got fed. What’s missing in all the talk about economic recovery is bedrock virtues like personal sacrifice and service to the greater common good. Like it or not, we can’t just spend our way to prosperity — at best, when we spend our way into greater debt, all we’re doing is making someone else prosperous, a prosperity that is won at the expense of others and of the environment.
Back in the 1950s and 1960s the USA was an economic powerhouse. But we had only a fraction of the personal and public debt that we have today. In my mind, those two facts are not unrelated.