"Let me put that on my debit card..."

Another stimulus package is likely to come along soon or, as Professor of Economics and finance at Yale University Robert Shiller suggested this past June, policy makers should “stand ready for another after that, and another.”

Details on how and where the next bailouts will be spent and to which bailiwicks they will be given are speculative but the possibilities are considerably different than those rebate check that dribbled through the economy over the past six months. More banks? More to Wall Street? The auto industry? Most Americans feel these are lost causes and do little to help them through their personal financial challenges.

President-elect Barak Obama is floating around the idea that, in addition to the Bush administration’s $700B bailout, another $700B may be necessary just to make a dent on the burgeoning challenges of the economy. One provision would allocate billions of dollars in funds toward projects to upgrade roadways, bridges and water systems. This is but a trickle of the $1-trillion some deem necessary to avoid further deterioration of the infrastructure.

The home mortgage crisis still demands bailout funds to hopefully avoid the next landslide of foreclosures… and the one after that. Governors want the assistance of federal dollars to meet their states’ needs for Medicare. Some would exempt the first $15,000 of income from payroll taxes. Extended and expanded unemployment benefits have already been given.

However bailout dollars are divvied up, people still want their own share of handouts and have control over how they spend whatever happens to be thrown their way, whether it’s spent, saved or invested. Immigrants, legal or otherwise, often send their money shares to families in their countries of origin. Using stimulus dollars in such a way defeats the purpose of getting money circulating in the American economy.

In 2007, immigrants sent over $40B to Latin American countries, of which more than half found its way to Mexico. Putting this in perspective, the $20B figure is more than Mexico’s yearly revenue from tourism. Although safeguards have been implanted to keep illegals from receiving rebate checks, this hasn’t prevented eligible immigrants from sending the money outside America’s borders. Regardless the exchange rate, it’s a bad trade-off for the greenback.

Economists admit that a good amount of stimulus dollars end up in foreign economies simply by Americans purchasing the endless variety of products manufactured overseas. This is unavoidable but there are steps that can be taken to make it more difficult for rebate recipients to exchange dollars for pesos, or any other currency.

The Treasury Department already issues pre-paid debit cards, called a Benefit Security Card, to Social Security recipients who don’t have a bank account for electronic direct deposit. The have proven to be an affective deterrent to identity theft and forgery, and the added problem of stolen checks. Nominal fees may be incurred for certain transactions on the debit card.

This same method of supplanting funds to taxpayers could be used to administer stimulus dollars, guiding all recipients to the intended goal of bolstering the economy through spending. Cash advances at ATMs could be restricted entirely. Other applications, such as money transfers outside the United States could also be restricted.

Debit cards would divert consumers away from putting their moneys into personal savings and investments – the only investment intended with a stimulus package is in the American economy, a concerted effort if it is meant to make a sizable difference.

Perhaps economist Robert J. Shiller will prove to be a bit of a prophet with his visions of multiple stimulus packages. Then again, perhaps fewer packages will be needed if consumers are made to spend their debit dollars on the goods and services offered by American businesses.

In any event, no one would turn down the opportunity to spend their token bailout funds with an extended arm offering payment with a piece of plastic saying, “Let me put that on my debit card…”

How stimulating!

An Assimilation of Prosperity

A stimulant is meant to temporarily boost the activity of an organism. Hypothetically, the heart of government stimulus payments is going to give the American economy a booster shot.

President Bush hopes to spur consumer spending, an attempt that some view as a misbegotten idea sure to come short of what's needed to get the economy on the road to recovery. The formula that the government uses to give validity to a recession is more lenient than what is on the minds of most consumers. Recovery has little relevance to the pocketbooks of cash-strapped Americans.

The sad reality of the payments is that they are actually more like a loan, the repayment of which will be added to other debts placed upon the next generation, possibly two. Those of us in our 50s or older will be less affected, or so we think. But our futures will most likely provide less security as the social costs of Medicare bring higher deductibles and reduced benefits.

Very few are immune from this Administration’s relentless spending of money that just isn’t there. Corporate elitists are the exception. They too will get their share of stimulus dollars, however reduced with a formula that lessens the amount for those making over $75,000, but to them it amounts to pocket change, a dime in their pockets compared to emergency funds as viewed by most of us.

Some people are disappointed in the payment schedule. Payments began May 2nd with electronic deposits. People relying on postal delivery for the legal size envelope with a government-issued check are most likely those without bank accounts, living week-by-week or day-by-day with limited funds. Many will have to hang in there until the final batch of play dough is mailed on July 11th. We’re half way there.

It’s not likely that lower income citizens will spend their dollars as the government intends. Mortgage payments, car loans, outstanding credit card balances and medical expenses will be primary concerns to many people. Food and gas might take precedence above all else. You have to eat; you must get to work. Spending money on luxury items will be less common.

Sunday newspapers will continue to offer deals with pages of glossy inserts offering a myriad of enticements to tempt consumers

The government cringes at the word “savings” but people are beginning to realize that having cash reserves is a means to ward off future economically challenging times. Years of false security and promises of ever-increasing buying power have come to an end. Frivolous spending has helped damage the economy. Living on borrowed money has to stop.

When analysts suggest dwindling home values are a natural order to bring pricing to realistic figures, it also points to a change of consumer habits whereby discretionary spending may come to a dribble. This will be devastating to an already gloomy economy but it may be necessary to bring America down from its high-hat altitude.

For years, consumers have accommodated corporations and their executives with mounting fortunes. A 360 is in order. Their profit margins will have to right size the economy. Many sustain their profits by reducing their workforce. Wall Street has a history of going goo-goo every time layoffs are announced, ignoring the affects of declining wages and unemployment. Us poor folks can no longer fill the corporate feedbag.

Whichever way you look at it, bailouts by the federal government are poor business practices. Ultimately, it is put on the economic shoulders of every taxpayer; many are spent-out. This land of milk and honey is turning sour; the hive is near empty. For the past three decades, we have been led to believe the trickle down effect from corporate successes will bring us all prosperity. The tide has turned and the lost earnings of the millions of American jobs shipped overseas are biting these businesses where it hurts in the end: sustainable profits.

Perhaps the best any of us can do with our stimulus dollars will be to give a little boost to
local businesses where friends and relatives are employed. Otherwise, those loved ones may find themselves in the ranks of the unemployed.

Whatever you do with your stimulus payments, it will be an assimilation of prosperity. The real thing may be a long time in coming.