The Stimulus Package and Bail Out plans are an attempt by the government to step up and try to help stabilize the economy.  With the Stimulus Package, the government wants to replace the loss of public demand with government money in hopes of stimulating the marketplace.

WILL IT WORK?

The jury is still out on how the Stimulus Package will benefit every individual, but some highlights are that there will be tax cuts benefitting low income and middle class families, and aid will be given to States to help them avoid public job layoffs (we’re talking teachers, firemen, and police here).

Jobs will be created to support the construction of proposed infrastructure projects, such as highways and alternative energy initiatives.  The government also plans to provide assistance to those struggling to pay high mortgages.  In many of these instances where a property is now worth less than what the buyer paid, banks will be encouraged to renegotiate interest rates so that people can save their homes and have a manageable plan to pay back their loans.

WAKE UP AMERICA

Ben says it’s fun to blame the politicians and bankers for this crisis, but the truth is that the average consumer shares the blame as well.   Over the last thirty years or so, we have become less and less prudent and responsible with personal finances.   In our lifetime, there have been a series of asset bubbles where people started to feel rich, and they lived for the moment – without taking responsibility and precautions for what might happen in a downturn.  As a nation and as individuals we have not taken charge of our finances, our debt, or our futures.

Ben believes that we are going to see a real paradigm shift in how Americans talk about the economy.  As a culture, together we must shift how we value our economic health, our job & career choices, and we must recondition ourselves not to take our lifestyles & futures for granted.

PEOPLE WILL START TO RETHINK CAREER CHOICES

Wall Street is shrinking – a huge number of jobs have been lost, and they’re not coming back.   Over the last twenty years the financial industry has replaced the manufacturing industry as the leading source of profits in this country.  But now, a career in finance is not necessarily the stable big money job that people dreamed of even five years ago.  American culture needs to make a psychological shift in this area as well. Young people are once again starting to value stability more and more when job hunting.

WHEN WILL THE RECESSION END?

Ben believes that for at least the next six months we will continue to see the economy go down.  He advises that no matter what your situation may be, everyone should be more financially cautious right now.

I asked Ben to predict for us when all this might end and he told me “Right now, when economists are asked to predict the future of our economy, they often like to answer with this proverb; Don’t try to catch a falling knife.  At some point there will be evidence that the knife is no longer falling, but we don’t have that evidence yet.  However, when that knife finally hits the floor, that’s when we can be less worried.  That’s when we can start looking up”.  Yikes – how’s that for a little doom and gloom to start your day?!

Not to fear — we at Fab & Fru think the best thing you can do is educate yourself now about personal finance and put a plan into action.  Even small steps towards getting your financial life in order will make you feel better about the big – and right now quite scary – financial picture!

 

**Ben Carliner is the Director of Research at the Economic Strategy Institute in Washington DC.  He is a political & economic analyst who also writes his own blog. To read more of Ben’s economic theories and essays check out www.smartglobalist.com.

*Fabulous & Frugal offers information we hope will be of interest to you, but we are not financial professionals. Always consult with financial professionals who are familiar with your personal financial situation before making any investment or other financial decision. For additional information, please read our Terms of Use agreement and Privacy Policy.

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