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01 May, 2008

The Rebates Are Coming

The rebate checks that are supposed to stimulate the economy will start hitting bank accounts by Monday, with paper checks going out May 9th. The idea was to counter the downward pressure exerted by the mortgage crisis, and for that to work, people must spend their checks.

However, according to the Wall Street Journal:

Recent surveys suggest that many Americans will use the money to pay off bills or increase savings. In a recent Associated Press-Ipsos poll, only 19% of respondents planned to spend their checks, while 45% said they will use the money to pay bills, and 32% planned to invest it.
When Congress was still planning this rebate, many comments I've seen online talked about a shopping spree, but not anymore. Nowadays, most people talk about using it to pay bills or buy gas. Ironically, as the same article noted, the increase in the cost of gasoline for a typical motorist equals the amount of the average rebate ($600).

Will the rebates help the economy? Yes, but by how much is anyone's guess. We import gasoline, so part of those rebates will go to the Middle East. Paying bills doesn't immediately stimulate spending, but people who need extra funds to pay off their debt would likely use their credit again in the following months. The 32% who plan to invest their rebates are defeating its purpose, which is why some analysts say this whole plan was too little, too late.

Whether it is or not, one thing is for sure: that $600 rebate provides much needed relief from the increased cost of daily living. It’s too bad that not more of it went to people who really need it, like the poor and unemployed, who would definitely spend it the way it was intended.

I’m not getting a rebate check, but if I did I’ll probably donate it to a favorite charity or political cause, which are usually the first to feel the pinch when things are tight.

Are you getting a rebate? How do you plan to spend it?

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posted at 12:00 PM by City Muse

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