Should consumers spend to save the economy?

In the current post-recession economy, taking a hold of our finances is key ... but should we save or spend?

The Obama administration is spearheading policies taking an aim at financial responsibility. However, tax rebates are given out to Americans to shop till they drop.

The ultimate mixed message? Perhaps.

So, what's good for the economy in the long run? In order to be productive in the future, consumers need to save now which will ensure financial stability to spend in the future.

According to an article at Yahoo Finance, "Economists have long fretted about the dangers between what the U.S. spends and what it earns." The U.S. borrows large sums of money from abroad, these debts continue to put downward pressure on the U.S. dollar. This is called an account-deficit. Thanks to our current economy, U.S. policy makers realize the time to end the gap is now.

"If you suffer a heart attack, your doctor's advice will probably include getting lots of regular exercise in the future -- but first you've got to get back on your feet," explains Mark Iwry, a senior adviser to Treasury Secretary Timothy Geithner.

We need to close the gap, before it gets any larger and causes any more damage. Although U.S. policy makers realize the gap needs to be closed, proposals have yet to be implemented. There is a proposal for expanding a tax credit for low income savers, and a retirement account requirement for employers. Saving as a requirement is the only way toward U.S. financial health.

The U.S. job outlook is a negative one, and little income growth certainly does not support consumer spending. This, along with tight credit, is only another reason to save. Yahoo Finance reports, " Although the U.S. account deficit dropped to 2.8 percent of the gross domestic product in the second quarter from a peak of 6.5 percent in late 2005, the latest news reports a growth in deficit.

What are U.S. consumers to do? Save over the next few months in an attempt to get your finances in order... then invest in opportunities that will boost future growth.

Debate regarding health care reform heats up

As President Barack Obama calls for an overhaul of the current health care systems, big health insurers are upping their lobbying money in opposition.

According to a report filed last month, the five largest insurers and an association of approximately 1,300 insurers under “America’s Health Insurance Plans” spent more than $6.4 million on first quarter lobbying. Robert Zirkelbach, a spokesman for the group, claims the 12-percent increase from last year is simply the group “putting all our resources behind building support of comprehensive health care reform.”

Obama's proposal aims to expand health care coverage in the form of government provided plans similar to Medicare, especially for children, low income citizens and the unemployed. Opposition to the bill claims the competition amongst their plans and government sponsored plans will actually make it harder to reform the current system and will be costly.

As Massachusetts struggles to finance its statewide health care bill, serious concerns arise on how to fund the estimated $1.5 trillion that will be necessary to cover the 47 million uninsured Americans over the next ten years.

Consumer United offers access to Massachusetts Individual and Family Health plans for those not qualifying for state-subsidized insurance or employer-sponsored plans. For a free quote or more information, click here.

--Lana Petersson

Obama offers plans to help a slumping economy

President-elect Barack Obama is poised to assume office under bleak economic conditions. With many Americans nervous about the country’s financial situation, Obama has outlined a number of measures he hopes to undertake to restore confidence and help families that are struggling.

As more and more people struggle with the aftereffects of layoffs and lost jobs, Obama hopes to extend unemployment benefits that could otherwise run out before the recipient found work again. He has also mentioned improving health care and education benefits. These changes in particular are likely to have a big impact on the middle class, a segment of the population that has been hit especially hard by the recent downturn.

Help for the American auto industry and its suppliers has also been proposed. The decline in American auto sales in recent times has led to widespread factory closures and unemployment. In turn, families with reduced incomes are less likely to buy new cars, so the industry suffers more. With government aid, American companies could focus on developing newer, more fuel efficient vehicles that have become popular since the price of fuel skyrocketed over the summer.

Those fuel prices put an unexpected burden on many budgets, including those of small businesses and state and local governments that maintain service vehicles. Another important tenet of Obama’s plan is to focus on the issues that both small businesses and local governments are facing to ensure that they can continue serving their communities.

--Bridget O'Sullivan