Why are the stimulus checks” bad economics?
Historically, consumer spending has accounted for 67% of U.S. economic activity, but that number has increased to nearly 72% in recent years. Much of that increase has come from increased debt – credit cards debt, auto loans and refinancing home mortgages. The national savings rate is at its lowest level since the Great Depression — moving for the first time into negative territory. What does this mean? That Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. This overconsumption has led to an $800 Billion trade deficit. In order to get back to a balanced and healthy economy, the savings rate needs to increase significantly and consumption needs to drop. The “economic stimulus package” is designed to increase consumption, and contributes to the overconsumptive habits that are driving the trade deficit up and the economy down. “The most important question to ask in economics is “X happens,
