Consumerism and recession

The current discussion of a stimulus package to avert a possible recession tacitly assumes the logic of consumerism. The signs of a recession are:
- Slow holiday sales (not enough consumption)
- Rising unemployment (not enough people working)
The remedy is to put money in people’s hands via tax rebates. The debate is over how much money to hand out, and who to give it to. The problem is that the money goes to the wrong people, they might save it or use it to pay off their credit cards instead of spending it. I am not making this up.
Federal Reserve Chairman Ben Bernanke made this point in testimony before the House Budget Committee. “If you’re somebody who has lots of financial assets and you receive an extra dollar, you may not change your spending much because you can simply either put the dollar in your bank account or take out a dollar as you need it,” Bernanke said. “If you’re somebody who lives paycheck to paycheck, you’re more likely to spend that extra dollar.”
But let’s look at this from the point of view of the person receiving the check. If you’re living paycheck to paycheck and worried about losing your job, should you spend the money on a flat-panel TV before you lose your job, or on food and rent after you lose your job? Hmmm, tough choice.


The Economist has