Why $800 Won’t Help!

So now Bush and the Demorats want to give $800 to the poor and middle class to spend and help stimulate the economy.  Unless these are gift cards to Home Depot and Wal-Mart it won’t work very well this time.

Let’s back up.  What is wrong with the economy?  DEBT.  Yes, the real estate bubble created by lending money to people who couldn’t pay it back has been burst.  Many are now behind in thier mortgage payments.  Many others took out equity via home equity loans and are behind on those payments as well.  We see banks now taking reserves as people are defaulting on credit cards and car payments.

So what will happen when many of these people get this unanticipated $800 check.  Will they go out and spend it?  I submit they will pay off some debt, whether it is a credit card or mortgage payment.  That money will get paid to financial instituitions such as banks. 

So this is a hidden bailout of banks not an economic stimulus package.  Like I said, if you want spending send out gift cards not cash! 

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