The big news is that Congress passed an economic stimulus package at the end of last week. Differences between the House version and the Senate version of the economic stimulus package have been worked out, and President Bush is expected to sign the bill.
But will it help you? Admittedly, a tax rebate sounds nice. Just think about what you could do, even with just the $300 minimum. Unfortunately, for many it won’t help a great deal. And while polls show that most Americans plan to pay down credit card debt with the money, practical experience tells us that they usually do just what the government wants them to: Spend it.
Spending it won’t be helpful in terms of your personal finance situation. Even if this economic stimulus package does shorten — or prevent altogether — a US recession, your personal finance situation demands better. If you do have credit card debt, put the tax rebate toward it. And save a little bit too.
Others that will benefit include those looking to buy homes in high-priced markets. In many markets, the homes are too expensive to qualify for Freddie Mac or Fannie Mae. And FHA insurance isn’t possible. The economic stimulus package temporarily raises limits to above $700,000 for the highest-priced real estate markets. This could start a comeback in some areas, but most folks living in more reasonably priced areas of the country won’t see much change in the real estate market.
Overall, the economic stimulus package won’t really help the economy in the long term. It may give you a quick personal finance boost, and it may bring the economy back to a measure of reasonable growth. But such superficial efforts to fix things quickly and instill “confidence” do not show underlying financial fundamentals. Which means that the economy will become more unstable in the long run, and in a few years we’ll be right back at this point.