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Government Check Highlights Income Vulnerability

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ERIC HILL

Published: February 26, 2008

While eating lunch the other day, a fellow staff member remarked that he could not wait to get his $600 from the government. The statement caught my attention, so I responded, "What are you going to do with it, spend it?"

"Yeah," he replied.

There were over 2 million housing foreclosure filings in 2007; add this to the other income vulnerability punch - namely, credit debt - and even the man from Mars understands why our economy is stressed. We dispose of too much income.

But wait, the remedy is a rebate: another cause for consumerism, buying of unnecessary things and an infusion of money that will turn our economy around. Will it also offset the foreclosure notice that is pending for the middle-class family?

According to the promise, the average middle-class family will receive up to $1,200. Instead of spending it, could we encourage them to use it for a mortgage or credit card payment? I believe that being able to maintain a home will go further to maintain one's livelihood than spending on something with little intrinsic value.

Time was in America, like its industrialized cousins in Europe, credit was extended to fight wars and for building infrastructure. We seem to be on spot with the former, but have lost sight of the latter. Can you say bridge collapse or Katrina catastrophe? Some argue that the damage caused by the hurricane was manmade because no investment was made to improve the levees. So we are not the blame for this attitude; we have leadership to show the way.

Wonder why China is fast on our heels to become the next economic power on the sphere called Earth? Savings rate and credit avoidance.

Economists argue about the true nature of the high saving rate of the Chinese. Including both public and private saving, it's around 40 percent, according to a study completed in 2007 by the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The same report attributes high savings to a general concern by citizens of the country's imperfect social security system, allowing market forces to meet housing demand, an unaffordable rise in educational expenditure and uncertainty of future incomes.

This sounds like some of the challenges we currently face. The Chinese also tolerate government policies that encourage high saving as opposed to going out and spending.

The history of China's economy has some lessons for us. Before we spend our $600 to $1,200 in rebates on unnecessary things, let's breathe a sigh of relief and address our collective income vulnerabilities.

Oh, my fellow staff member - he's not married, does not own a home or have any children. He is going to spend his rebate.

Eric Hill is a husband and father and lives in Tampa.

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