Rancho Santa Margarita Blog

Phrased differently, is my $600 check really enough to turn this economy around? No, and it’s not
designed to do so. However, it will do more than you think. At its core, the package employs a simple concept. One of the first things that happens in a recession is that people lose their discretionary income. As a result, people stop buying iPods and designer jeans and, instead, purchaseCD players and Levis. The top-tier vendors have to cut back and fire some of their workers. Since they tend to offer higher-paying jobs with better benefits, these jobs are a substantial loss to the economy. The displaced workers essentially move down one rung on the economic ladder. This cycle can continue for several classes of workers, and the cycle is very difficult to reverse. This is what economists mean when they say, “we may talk ourselves into a recession.” Small clinical studies have shown that even a modest cash “prize” or “gift” can alter this tendency to spend less, causing people to focus on their extra cash, instead of the decreased bonus at work or the higher prices at the pump. Of course, that’s only the most prominent element of the Stimulus Package. Also included were improved lending conditions and an increase in the amount of credit available to certain banks.