Did Stimulus Checks Really Boost the Economy?
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Have You Seen This?

Have You Seen This?

It's over and done with - on July 11, the last stimulus checks designed to circulate through the U.S. economy and give it a much-needed boost, poured into American bank accounts. Now all we had to do was spend, spend, spend... just like Mr. Bush told us to. After all, it's our patriotic duty.

But has it worked?

"Stimulus checks boost spending," reported the New York Times on June 27. "Consumer spending rose by a nine-month high of 0.4 percent in May, with $48 billion in federal tax rebate checks lifting personal income and savings, the Commerce Department reported this week. At the same time, personal income rose by 1.9 percent, up from 0.3 percent in April, while the personal savings rate increased by 5 percent, the highest reading since March 1995, the report said."

Out of curiosity, this week I did a private little survey among friends, relatives and coworkers, as well as in a few message forums on the Internet.

I posted the simple question, "What did you do with your stimulus check?"

53 people replied, and even though this small number is by no means representative, I found the results quite telling. [Note: I allowed for multiple answers, since one check may have been spent on different items.]

Of all the responders, 30% did not receive a stimulus check. Of those, 68.7% said they were not eligible, 12.5% hadn't filed a tax return, and 12.5% stated that their checks had been seized to pay for back taxes and other government arrears.

Of those having received a check, only 29.7% set out to stimulate the retail business. A whopping 43% said they put all or part of the money into a checking or savings account (21.5%), invested it or bought precious metals (13.5%), or kept it in cash under the proverbial mattress (8%).

For 45.9%, all or part of their stimulus check went toward utility bills and car repairs (29.7%), property taxes (5.4%), rent/mortgage (10.8%), and other living expenses (5.4%).

For some, the extra money has just been a welcome band-aid to make it through another month. One of the surveyed stated laconically, "I planned on buying shoes and other meaningful things, but by the time the check came, my financial situation was so desperate that it just filled the hole for this month." Another noted that "it saved my butt from going under at that particular time."

Even among those who bought "stuff," 54.5% spent some or all of the money on "sensible" things, such as home repair/improvement or necessary household items. 72.7% said they spent at least some of the money on fun or luxury items.

The National Retail Federation (NRF) reports that one-fifth of parents have saved at least a portion of their stimulus checks for back-to-school shopping. Back-to-college spending is expected to drop 7% this year.

"College students are learning a hard lesson that when economic times are tough, fun purchases take a back seat," said NRF President and CEO Tracy Mullin in a press release. "While students will still be buying school supplies, they will scale back spending on clothing, electronics and dorm furnishings."

By and large, that's a far cry from the piles of flat-screen TVs, computers, iPhones, clothing and jewelry the Bush administration and our congressmen expected to fly out the stores.

Bloomberg tells us that "the effect of the tax rebates is already fading." Retail sales rose a less-than-forecast 0.1% in June. J.C. Penney's same-store sales decreased 2.4% percent in June, a result that, while better than the company's own forecast, was worse than analysts' estimates.

Maxwell Clarke, chief economist at IDEAGlobal Inc. in New York, told Bloomberg: "Whatever support you're seeing for the economy, it's probably going to be short-lived. What's going to keep the consumer spending beyond the rebate checks?"

Why, another wave of rebate checks, of course. Congress is already working on it: the sequel to the $100 billion package, if it passes, would likely be in effect by October, with checks being sent out early next year. Better luck next time? I doubt it.





Posted 07-29-2008 10:18 AM by Shannara Johnson
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Comments

James Pedestrian wrote re: Did Stimulus Checks Really Boost the Economy?
on 10-04-2008 9:26 AM

Is the economy stimulated more when 'piles of flat-screen TVs, computers, iPhones, clothing and jewelry . . . fly out the stores" than when people pay bills, save for school expenses, or keep various parts of their anatomy from going under water?

Paying debts is good for the economy.  Saving money is good for the economy.  Buying goods and services is good for the economy.

Once I deposit money in an account, I can no longer tell which dollar came from the stimulus check, which came from my paycheck, and which came from an interest payment, but each dollar makes good things happen that would not happen otherwise.