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US unclear on whether to save or spend cash

AFTER the September 11 attacks, then the US President George W. Bush urged Americans to go shopping. As he hands out US$789 billion in economic stimulus, United States President Barack Obama has been less clear -- and Americans simply don't know whether they should save or spend.

"It's a tough question," said Cincinnati electrician and small businessman Mike Cavanaugh. "I think that in general the government wants us to spend. While saving may be better in the long run, spending I think can be contagious because we see each other doing it."

In Scottsdale, Arizona, business owner Bill Austin said the government's message has been mixed.

"The government doesn't know what's going to fix this, but I think they believe that people should start spending again," Austin said. But he's skeptical: "Just me going out and spending money isn't going to fix this."

After a year of being castigated for the consumerism that drove the nation's boom-and-bust housing market, Americans can be forgiven for not quite knowing whether they are doing the smart thing by spending or saving.

Obama, at his first news conference as president on Monday, dodged the question, arguing that consumers, like the government itself, need to do both.

"Our immediate job is to stop the downward spiral," Obama said, suggesting that spending was the answer. But he warned that thrift would be needed soon after.

Kevin Hassett, an economist at the conservative American Enterprise Institute, said people would be wise to be cautious and take any extra cash the stimulus plan gives them and save it, since individual tax bills will inevitably rise once the economy has recovered and Obama and Congress have to claw back money to tackle the gaping federal deficit.

"So the right answer is to save, but that's bad for the economy," Hassett said.

"Clearly what's good for the individual isn't necessarily the thing that is going to give us the best GDP number this year," he said.


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