I found it interesting that so many politicians and economists (including Bernanke) voiced support for a "rebate" to prop up the economy in classic demand-side fashion... until I remembered 2008 is an election year. The problem with the rebate program is that we've tried it before and we've found it to generate very little stimulus effect on the broader economy because people save it rather than spend it. The Flint Journal provides a great insight into this "phenomenon" with a recent article. An excerpt:
Nanny Marlena Robinette, 29, of Davison, already has a plan for the economic stimulus rebate check she'll receive this summer.
"I'm going to pay off bills," she said last week while shopping at Target in Flint Township.
Others, such as Judy France, 64, of Vienna Township plan to save it.
"I won't be spending the money," France said.
"I'm going to pay off bills," she said last week while shopping at Target in Flint Township.
Others, such as Judy France, 64, of Vienna Township plan to save it.
"I won't be spending the money," France said.
What is most insightful about this is where the article is coming from - FLINT and the GREATER-FLINT AREA - which is one of the most economically depressed areas in the country. If people aren't going to spend their rebate check there (the argument is that those most in need of help will be most likely to spend it), where will they?
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