With global markets selling off on fears that President Bush's stimulus package won't be enough to stave off a recession, The Wall Street Journal reports (subscription required) on how Americans might spend the $150 billion in refund payments Uncle Sam may dole out: "At that rate, consumers could expect to receive checks ranging from $600 to $1,000 per household. Consumers are likely to pick one of three options for the money: Spend it, use it to pay down debt, or save it."
Well wasn't that enlightening? Apparently sagging home values and a sputtering economy have pulled the fourth option off the table: burning the rebate checks in a satanic ritual involving incense and The Ethel Merman Disco Album.
On a slightly more serious note, there is an air of cynicism surrounding the whole stimulus package (Quotes from the WSJ piece):
"Getting money to people quickly is good and getting money to low- and moderate-income people is good to get a bigger bang for the buck. - Ben BernankeGive the average consumer a check for 50 bucks and he knows what to do with it." - David Wyss, Standard & Poor's chief economist.
"If you ask consumers what they'll do with the money, they'll say that they spend much less than they actually do. A significant number of consumers will say they will use the money to pay down debt. They will take the rebate check and mail it directly to their credit-card provider. But what happens to their credit-card balance six months hence? If it's where it was before the rebate checks, they've actually spent it though they don't think they have." - Moody's analyst Scott Hoyt.
These experts applauding the fact that the rebate will induce spending by cash-strapped and debt-burdened consumers are forgetting one of the leading causes of our economic woes: people buying stuff they couldn't afford with money they didn't have.
In the short-term, inducing people with financial woes to go buy consumer goods might give the economy a shot in the arm. But if our country is to prosper in the long-run, we've got to find a way to fuel economic growth that does something other than rely on irresponsible spending by low- and moderate-income workers.
Otherwise, we might as well just have IRS workers head to Wal-Mart and buy every American a PlayStation 3 and a case of Doritos.
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Reader Comments (Page 1 of 1)
1-23-2008 @ 4:35PM
Beverly Smalley said...
I say you take the rebate check and put it away into a savings account to start you China Vacation fund. :)
If you are going to spend the money on products from other countries, why not go to the other country to get the product? You will end up getting more out of the 'purchase' in the long run. Maybe even find a job and get a house there... :)
1-24-2008 @ 7:49PM
pwhited said...
Hehe.. Funny stuff this tax rebate. I think Jerry Ford sent me a check for 100 dollars way back in the "Whip Inflation Now" days. What will I spend the latest tax rebate on? That's easy. To pay my TAXES.
1-25-2008 @ 12:22PM
DEvans said...
I'm gonna send it back "Return to sender." The last time I got a rebate check (2001) from the government, I had to pay the whole thing back in 2002 taxes. Plus it booted me into a new tax bracket. Do yourself a favor. Send it back!!!
1-28-2008 @ 1:39PM
kristina said...
I think president bush should probably visit this website http://www.storyofstuff.com/ it talks about us buying to much stuff and really literally killing our planet! Who cares about credit card debt or mortgages or the economy at all, if the planet isn't around or in such bad shape we can barely live here anyway! But who am I? I'm not a presidential candidate or even in my state, county or city's governments...I'm a 22 year old student with a job as a bartender, who may just wanna see my grandkids grow up in this wonderful place we're trashing! I think they should put the money into making green our way of life or even to companies in the USA so they can make their prices lower so we don't have to buy so much from china! That may not help us immediately, but at least it will prolong the life of the planet!
1-28-2008 @ 2:40PM
Dave White said...
If everyone is against this "stimulus" package on the street, why can't we stop it? I've written to my Senators to vote against it or at least try to stop it. Borrowing from Peter to pay Paul won't work, especially when Peter is in debt himself up to his eyeballs.
What would be the effect if the highest percentage put the money in savings?
2-03-2008 @ 2:00PM
Mark said...
Gimme Muh Monies!!! =P
2-07-2008 @ 9:52PM
laid off in USA said...
SHOW ME THE MONEY! There are NO jobs in Michigan where Im at, people are hurting so much here. I along with everyone I know will be spending the rebate to pay off my shut off notices and feed my kids. Maybe I could use the rebate to pay for 2 months of health insurance for my kids or fill up my tank for a MONTH in gas? Oh, What will I spend it on!? No big shopping spree here.... just TRYING to get through one day to the next.
3-08-2008 @ 8:32AM
Mark said...
Had to add this...My 'gimme' comment was kind of meant jokingly, but not totally. To 'Dave White'...you must be a Republican with a cushy, nice paying job? Must be nice to able to afford your opinion? The reality is that MOST Americans would side with 'laid off..' (the comment right after my last). You keep writing to your senators, the 'rest' of us will stay in the trenches, where real day to day life happens, and patiently wait on this rebate.............I can only say this would be only thing that Bush did for us. Think of how all that money and time spent in Iraq could have turned things around at home? Write your senator about that also.
1-22-2008 @ 9:20PM
At Home Entrepreneur said...
I really can't see how the rebate check is going to help the economy. If you're truly concerned about the economy, you're going to hold the check out of fear. If you are mildly concerned, you're going to put it toward your credit card debt, but not spend on your credit cards...and if you're not at all concerned about the economy, you're egoing to spend the money but not on anything worthwhile that is going to stir the economy. I guess something has to be done and it may have worked somewhat in the past, but I just don't see it.
Sean
www.sphproductions.net