HolyCoast: The Stimulus Isn't Stimulating Spending
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Friday, June 26, 2009

The Stimulus Isn't Stimulating Spending

The AP has the details:
WASHINGTON – Households pushed their savings rate to the highest level in more than 15 years in May as a big boost in incomes from the government’s stimulus program was devoted more to bolstering nest eggs than increased spending.

The higher savings rate is healthy in the long term, economists said. But without vigorous consumer spending, the government may have to do more to revive the economy, possibly through further tax breaks and spending.

Consumers aren't confident that government efforts are accomplishing anything, so they're keeping their money rather than spending. No further stimulus spending by the government is likely to change that.

If you want to get people spending, try tax cuts, especially on capital gains. It works every time it's tried.

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