The problem with sending stimulus checks to households is the same as the problem with sending no-strings TARP money to banks: presented with a gift, both entities are likely to focus on their weak balance sheets first. And with good reason. “Lend and spend? Isn’t that how we got into this mess in the first place?”
We now have some view of the fragility of the former Wall Street institutions, and household savings must some day revert from its current 2% level to its long-term, pre-Reagan average of closer to 8%. Will:
Unfortunately, one thing government can do quickly and efficiently — distribute checks — could fail to stimulate because Americans might do with the money what they have been rightly criticized for not doing nearly enough: Save it. Because individual consumption is 70 percent of economic activity, St. Augustine’s prayer (“Give me chastity and continence, but not yet”) is echoed today: Make Americans thrifty but not now.