First, I do not understand the concept of lay-a-way at all. Why not just save up your money and THEN go buy the item rather than paying for it in installments when you don't even get to take home the item. I'm paying for my car in installments but I got the car at the front end rather than at the end. You are paying for an item you don't have...doesn't make sense to me.
Second, yes the economy stinks. Yes, you may have to go without some big ticket items, but Christmas does not have to be a meager sad pity party. My dad's favorite quote of all time is:
Prior planning prevents poor performanceWrite that down. You need to remember it. We may be spending less at our housethis Christmas but we are getting/giving way more this year. I stocked up on toys during Toys R Us christmas in July sale and Target's clearance sale in August. Also if you watch coupons.com they will post toy coupons frequently such as My Little Pony and Nerf. If you pair these coupons with the specials at Toys R Us or KMart (both almost always have a $5 off $25 coupon that you can stack) you can get lots of toys very cheap. You also can use register rewards at Walgreens for both toys and photo lab. For teachers gifts I always go to Bath and Body works. When they release coupons that say (for ex) "1 free lotion with any purchase" they really mean ANY purchase. You can buy a nail file on sale for $.50 and get the $5 lotion free. These coupons are usually released every other week so if you watch for it throughout the year then you have a large stockpile by Christmas time for gifts. I also love MyPoints, SurveyHead, and other survey sites. They are quick and easy to do and pay out in checks, paypal or gift cards. At MyPoints it takes no time to reach enough points to get a $10 Kohls gift card. Pair that with Kohls weekly deals and you can get a really nice present for someone for next to nothing.
So it's actually very easy to have a cheap Christmas and by cheap I mean on your bank balance and not sacrificing quality or quantity.