Tax rebate smackdown: President Bush vs. Suze Orman

This one is a bit off topic, but it caught my eye and I thought I'd pass it on because so many of you have commented on the nation's addiction to consumer debt.  President Bush says he expects Americans to spend their upcoming tax rebates, to help the economy: "These rebates will begin reaching American families in May.  And when the money reaches the American people, we expect they will use it to boost consumer spending, and that will spur job creation, as well."

Personal finance guru Suze Orman (pictured) is advising, "Stash it, don't cash it": "The rebate you're about to get should be saved, not spent. It should be used to pay down debt and build up an emergency savings account. If you listen to Washington and spend the rebate, and we still slide into a recession and you get laid off, don't count on extended unemployment benefits to help you weather the storm -- that provision didn't make it into the stimulus package."

Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: NBC

Comments

[Laker]

I've been reading & listening to Suze Orman for a long time. This lady does NOT have any hidden agenda (even lefty will agree with me here). So if she says we better stash the $600 check, you better listen to her. I'm a republican in general and liked many of the presidents action, however on this one, he is dead wrong! and completely misleading the public, (albeit he has no choice but to do that)

I'm sure NOT going to spend it, it is going straight (as in direct deposit) to my high yield money market account (for house down payment purposes).
In fact, as soon as i get the check/direct deposit, i will cut back on my spending by at least the check amount. That is i will take a way from my regular cash flow, and match uncle sam's check in my savings! Here you go stupid stimulus package!
I think all the smart people will do the same!

[seattlesnoop]

Suze is right!

[Michael]

Like one $600 check will stimulate the economy? Yeah, sure, and one gallon of gas will stimulate a car engine to keep running. Once the cash (or gas) is gone, then what?

This is the fundamental error in the reasoning of the Bush administration: one-shot deals just don't work. There has to be a continual stimulation to make it work, not one shot.

Do this exercise. Take the fed income tax withholding from your last paycheck. Mutliply it by the number of paychecks you get in a year. That's a big chunk of change you could use to stimulate *your* economy, right? Now take your withholding number and multiply it by 150 million and you'll get a low-to-average estimate of what an economic stimulus package would look like across America *every paycheck* if there were no income tax. That's real money with a real impact, namely to you and yours!

Which just proves that the biggest roadblock to economic growth is, as it always has been, government.

You can't tax your way to prosperity. More take-home pay is the only way. That means less taxes, period.

[Jim G]

I'd classify myself as a Warren Buffett Democrat, and I also have found Suze's advice to be rock solid.

I have found George Bush's advice to be, shall we say, less solid.

I think I'll listen to Suze this time around.

[H]

This is money borrowed from places like China and Saudi Arabia and the country will be paying interest on it for decades. What's the diff between this and a HELOC that you can't pay back?

[Laker]

Sorry to clutter the comment section but i found this to worth noting;
"Like one $600 check will stimulate the economy? Yeah, sure, and one gallon of gas will stimulate a car engine to keep running. Once the cash (or gas) is gone, then what?

Michael, awesome comment!. Uncle Sam is actually giving you 200 gallons of gas...ohh wait, no he gives you 171gallons...oh no, 150 gallon...shoot, only 100 gallons of gas...ahhh....
You got the picture, the longer we wait, the less gas we will have, either we burn it by driving or we release it after a bad meal...

[arroyogrande]

Are you people MAD? Spend, spend, SPEND!

Turn those machines back on! TURN THOSE MACHINES BACK ONNNNNNNNNN!!

- arroyogrande

[erinkeenan]

i hate her motivational speeches they trot out on pbs but i LOVE her show. it's mesmerizing. sometimes i think she is hypnotizing me. i like when she calls me 'girlfren'. i have been watching her since 2004 and before that time nothing bored me more than personal finance. but she has been right since then about this mess and she delivers it in a compelling way. i remember even back in oct. that a fidelity fund manager i know was predicting a soft landing. this is the type of person who would typically scorn suze and her advice as being low-rent etc. all i can say is im glad he is not my fund manager. suze is so right on this one. and every show she does: there is not a soul on there with emergency cash on hand.

[GeekSeek]

From what I've seen of her, she has good standard *personal* financial advice. She may care greatly about the economy as a whole, but her livelihood depends on giving useful advice to individuals. We all know what happens when everyone does what is best for just us.

From the wacky world of wiki:

"In 1998, Forbes magazine reported that Orman had misrepresented her credentials and background. For example, at the time of writing of the article, she claimed a current Commodity Trading Advisor license which had lapsed, and some of her materials claimed eighteen years' experience working with Wall Street institutions when in reality she had seven.[9] The San Francisco Chronicle ran a follow-up article.[10]

Forbes was also critical of the quality of advice given.[11] The article states:

"Buy her book for $23...and you get such tips as: 'Use self-service gas pumps rather than full-serve.' Or, 'Use coins, not your calling card, in pay phones.' On a recent Oprah, Orman advised viewers to search through their closets for misplaced money."

[MG]

Suze is right and for those of us with extremely minimal debt (< $500.) we will either pay it off or save it; just our small part in refusing to participate in the "consumer culture".

[left of lefty]

i agree with suze. the rebate check should be saved -- into your down-payment account.

on another note, has anyone noticed an increase in mortgage refinance junk mails? i've gotten two this past week, after months of not getting any. one advertised a 30-year fixed 5.75%. but the monthly payments were way too low for the sample loan balances. reading the fine prints reveal that the '30-year fixed 5.75%' is really interest-only for first 10 years with a much higher apr. looks like the mortgage fraudsters are returning from the dead. be careful out there.

[Louis Mandrapilias]

What is everyone thinking? The GOVERNMENT is all of us. Nobody is giving us anything. We are giving ourselves another handout which is going to be added to the already overblown deficit which we all pay for eventually. And if not us, our kids and grandkids. Wake up, there are no handouts, just borrow and pay back at a later date.

BTW: I'm paying down debt with my check.

[Jack]

>it is going straight (as in direct
>deposit) to my high yield money
>market account

When was the last time you checked the yield on your mm account? Chances are it ain't too high any more. Thanks to the Fed "stimulating" the economy by lowering interest rates, the yield on most mm's is now below 3 percent and going down; even highest yield Vanguard is now below 3.5 percent and dropping every day. With the Fed expected to lower rates again through the year, you'll be lucky to get more than 1 or 1.5 percent on a top-tier mm like Vanguard. All this "stimulating" by the Fed is ruinous to savers, but the Fed doesn't really care about them. They want people in hock to their eyebrows to pay for more "growth."

[Ann]

You can't tax your way to prosperity. More take-home pay is the only way. That means less taxes, period.

Posted by: Michael

_____________

Onlly if you care to do without clean water: clean rair and maintence of roads, bridges, highways, water and sewer systems; police,fire and emergencysquads; National Guard and the military; medical and scientific research (US gov't is the biggest funder), and the list continues.

Only a fool thinks that 'no taxes' is the answer. Societies have to collective actions to accomplish many things. No taxes, no government. No government, no laws or rules.

Try this for raising incomes:

GIVE EMPLOYEES A RAISE.

GIVE EMPLOYEES A RAISE THAT IS MORE THAN THE INFLATION RATE.

Real easy to do - cut the wages, bonuses and other money-goodies going to those at the top of the income tree.

In 1980, CEO's made about 40 times the median worker in the business they run.

Now, CEOs make around 280-320 times more than the median worker in the business they run.

SHARE THE WEALTH.

Between 2003-05, the top 1% had their after-taax incomes rise by 43,5% (that is NOT a typo.)

Between 2003-05, the bottom 80/90%, had their after-tax incomes rise by an average of 3%. That is less than the rate of inflation.

[John]

Suzie is a joke. She tells everyone how to invest, but she doesn't do what she preaches. She is a con artist getting rich out of selling useless books and videos. Anyone check her background and experience? Suzie and her lesbian lover/her show producer are laughing all the way to the bank.

As for the refund checks, most people will spend it. Any extra money coming to people will be spent, why? If they had the ability to save in the first place, we wouldn't be such a debt plagued country making frauds like Suzie rich by buying her books and her videos.

[Michael Snyder]

I don't know what scares me worse; our President serving up this tripe, or the number of Americans who actually bought off on this as a solution. Please note this action required an "Act of Congress" to become a reality. Some may complain about the educational requirements for Realtors, but please note Congress is inhabited by college grads and they signed off on this.

As usual Suze's right on. I like this lady and I enjoyed watching her chew her tongue to shreds when the guy called up asking about the $63,000 Corvette. I'd really like to see her get together with Cramer and have them invite Paulson & Bernanke on CNBC for an hour reality check.

[Laker]

Jack,
I checked my top money market account today. I agree, I'm getting much less than i use to get thanks to Helicopter Ben stimulating the economy....
However, is till make 4%...i think it is a little better than the -18% the Stock market did this year....

[sheila]

i'd like to use mine to "lobby" my elected officials to do something that might actually benefit me instead of some giant corporation. if we all pooled our refunds, maybe we could buy them off and get like 1-2 laws on the books that help us more than they help Chevron, Pfizer, GM or Halliburton.

anyone?

[Truth2Pwr]

Sorry, I don't take advice from people who can't even spell their own name correctly.

[wha]

Suze Orman is nice and all, but the times I've seen/heard her, she's just spouting COMMON SENSE. It ain't rocket science. Don't spend more than you have. WOW what a revelation. You really don't need to be a financial wizard to have good finances, sheesh.
Problem is, I guess the general American public doesn't have too much common sense.

As far as saving the rebate goes, my savings account at BofA gets 0.2%.... 0.2%!!!!!!!! Not even 1 percent, not even half a percent! I earned a whopping $0.60 last month! And they're not even sending me a 1099 this year for interest because I didn't even earn more than $10 measly bucks the entire year!
My Immigrant Direct savings used to get around 5% a year ago. Now it's down to 3.3%.
Thanks Bernanke! You're awesome!

[Inland Empire]

On a recent Oprah, Orman advised viewers to search through their closets for misplaced money."

Guess you didn't read this weeks article about the $30K found in clothing by a thrift store worker in Pomona.

[Laker]

wha, you had about $3600 in B of A account earning 0.2%? Are you crazy? Close that miserable account, and transfer the funds to the other account earning 16 times more...
B of A are greedy xxxx, they pay you 0.2% and use that money to charge 20% on a credit card...pull the money and let them suffer.

[Trudy Self]

My favorite Suze Orman quote was back in 199 when she said, "Find a good mutual fund returning 10--12%...."

[areles]

"Suze Orman is nice and all, but the times I've seen/heard her, she's just spouting COMMON SENSE."

Exactly. Suze Orman is the Dr. Phil of personal finance.

[la voce bella]

Hello, Laker...would you consider revealing the name of your high-yield money market? I'm looking for one and could use some advice. Many thanks.