It seems the idea of a second stimulus check is gathering steam. Over the last couple weeks several writers have mentioned the possibility, citing rumblings from House Democrats. I wasn’t overly enthusiastic about the first stimulus check, and I believe a second check would be downright irresponsible. So what’s fueling these rumors of a second stimulus check?
First Check Failure
With their first economic stimulus check many Americans will elect to build emergency savings or pay down debt. Both of these actions are financially wise, but do not do much to stimulate the economy. In fact, I put most of my stimulus check into our emergency fund at ING Direct. The consensus seems to indicate that if a second round of economic stimulus payments goes out it will likely be spent since the first provided some debt relief and/or a savings cushion. This theory seems to make a lot of sense, and if generating more spending is the ultimate goal, a second payment would likely generate results.
Iraq War Funds to Enter the Debate
Some are predicting Democrats will tie a second economic stimulus payment to Iraq war funding, making it even more politically unpopular for the President to strike down the measure. Without getting too political, I don’t like the idea of anyone on either side of the aisle using war funding as leverage in economic stimulus negotiations. I could think of several programs I’d cut before defense spending.
Regardless, the argument ought to be a moot point because I don’t believe there is a need for a second economic stimulus package. Under a pure capitalist system markets will ultimately correct themselves. Yes, it could make for a very difficult period of months, or even years, but government intervention is rarely the answer.
Be Prepared – Just in Case
If a second stimulus check does find its way to your mailbox consider using it in much the same manner you used the first (assuming you used the rebate check wisely). Resist the temptation and political peer pressure to simply spend the rebate check for the sake of spending it. If you have no emergency savings, start an emergency fund. If you are deep in debt, apply the rebate money towards your lowest credit card balance and become closer to living debt free.