Feb. 28 (Bloomberg) -- The stimulus plan Congress approved this month may provide less of a jolt to the U.S. economy than intended, as most Americans plan to save rather than spend their tax rebates, a Bloomberg/Los Angeles Times survey shows.I wrote a while back about the first delivery of helicopter money that "If [American families] save it, as I suspect they will do, all that has happened is that a negative $150 billion has moved from the balance sheet of the government from those of individuals. That's the best that can happen for individuals..."
Only 18 percent of respondents said they will spend their rebate on purchases, while slightly more than three in 10 said they prefer to use the money to pay off debt, and a third said they'll pocket it.
And I certainly stand by that. Americans, as individuals or households, gain almost nothing by running out and spending the newfound bounty right off. Not only would it likely be spent on something that they don't need* and that would depreciate quickly anyway, but they are still on the hook because they'll pay taxes to Uncle Sam to pay the interest on that money in perpetuity**. Saving that money for the day a need comes up is the best solution, followed closely by paying off the residual debt for some of the Magic cards they have bought in the past. It looks like 2/3 or more of Americans are going to take that route.
Of course, Americans doing what is in their own interest will almost certainly frustrate the purposes of their government, which is to increase the magical GDP number, to keep Americans spending more than they earn in perpetuity***. But being smart in this case has two advantages: not only will they improve their own balance sheets immediately, either by increasing the assets column or decreasing the liabilities one, but they will almost guarantee that Congress will give them free money again.
When I was about 10 I wondered, if money is just printed up by the government, why they couldn't simply print up a million for each of us and then we could all be rich and not have to work. Since that day I have discovered the answer, but it has still evaded Congress, which will have to discover the answer for themselves. But it looks like, in the short term anyway, the majority of Americans are going to try to get out of the way of the inevitable results of that experiment. W00t! Good on 'em. There is still American genius after all, though when it arises, it tends to manifest itself in places other than the voting booth.
* How many Americans "need' as opposed to "want" something they don't have but which can be purchased for a few hundred bucks?
** If the dollar wasn't completely in the tank (and looking to get worse as I'll cover tomorrow) the best of the best solutions would be to buy Treasury debt with that money and collect their tax money back in interest, but with the dollar as it is, they might as well buy Magic(tm) cards. Those are more enjoyable in the short term and possibly more valuable in the long term than Treasury promises to print you up some green pieces of paper some time in the future.
*** which would be great if it were possible, though the fact that something is impossible has never kept Congress from spending gobs of other people's money to make it happen anyway.