In evaluating whether President Obama's stimulus plan is working, a number of economists I spoke to for my report in NBR's "Signs of Stimulus" Memorial Day program pointed to the intangible effect of "optimism." The theory is that because the government is taking decisive action to fix the economy, people are already feeling more confident and secure. While that may be true, whether that newfound cheeriness will result in spending is less clear.
Economic theorists have debated for some time whether there is a correlation between consumer sentiment and optimism. For myself, I know there is a strong connection: the happier I am, the more I shop, and vice versa. But, happiness is an elusive quality and we all know that emotions can change very quickly. Is an upbeat American enough to bank on when looking for a way out of this monstrous recession? Probably not...but I guess it's a good place to start.
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I had a much cheaper solution (Stimulus package) that Washington, of course, ignored...Give every US Taxpayer of 5 years 1 million cash to invest. So in cash terms we're talking maybe 250,000 X 1 million = $250,000 million versus 780M+, right? Current mortages could be paid off making banks cash rich, possibly avoiding failures. Foreclosures might have dried up not to mention new car sales spiking dramatically. Local businesses would prosper with a huge influx of consumer buying power. Even home improvement could see a boost in revenue. People could have made safe investments to insure their retirements as well, taking some of the pressure off relying on Social Security. All this could have been accomplished for a fraction of the current stimulus package. What are your thoughts, Suzanne?