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WORLD> America
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To save or to spend? Americans ponder their duty
(Agencies)
Updated: 2009-02-13 15:24 For many Americans, the stimulus will come in the form of a fatter paycheck, as withholding taxes are cut. Others will be hired for infrastructure projects approved under the plan. But while Washington may be hoping the stimulus will send shoppers back to the stores, convincing Americans it is wise to spend again may be an uphill battle. Magazines are full of tips for saving money, companies have cut back on advertising, and no one hesitates to boast about their frugal ways. "I watch my money closer now, as does my wife. I cut out the morning iced coffee at McDonald's, even though it was not that expensive," said Cincinnati's Cavanaugh, adding that he was being just as cautious with his business. "I am doing the responsible thing and cutting back." Kevin Hassett, an economist at the conservative American Enterprise Institute, said it may not matter what message the government is trying to send -- since people react predictably when the government gives them extra money. "You can break the response down into two types. A little less than 40 percent take the money and consume it right away," Hassett said. "The rest of the people, a little more than half of Americans, don't really change their behavior much at all." And while negotiations about the economic stimulus have been front-page news for weeks, polls show a dramatic cutback in US consumer spending and lack of confidence about future finances, even if money is poised to pour into the system. A poll released on Thursday showed 86 percent of Americans have cut spending or changed their saving or investment pattern, though just 30 percent say the thrift was driven by actual financial hardship. The rest, 56 percent, cut back because they worry their financial situation may get worse in the future, according to the national survey by the Pew Research Center for the People & the Press. Hassett said people are wise to be cautious, since individual tax bills will inevitably rise once the economy has recovered and Obama and Congress have to claw back money to tackle the gaping federal deficit. "So the right answer is to save, but that's bad for the economy," Hassett said. "Clearly what's good for the individual isn't necessarily the thing that is going to give us the best GDP number this year."
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