The last time Americans got rebate checks as part of a government stimulus plan, consumer spending rebounded, buoying economic growth. This time, spending is...
The last time Americans got rebate checks as part of a government stimulus plan, consumer spending rebounded, buoying economic growth. This time, spending is likely to rise again, but perhaps not enough to avert a recession, some experts say.
The Senate will soon vote on a plan for $100 billion in tax rebates approved Tuesday by the House. The figure represents about 0.7 percent of gross domestic product, more than 2001’s $38 billion program, at 0.4 percent.
Most households will receive $600 to $1,200, or more, and checks could arrive in the spring.
In 2001, as the economy reeled from the dot-com bust, most households received $300 or $600 in rebate checks in July through September.
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“Most analysts agree that the 2001 rebate stimulated the economy, although there is some debate about the magnitude of the effect,” Congressional Budget Office Director Peter Orszag said in Senate testimony last week, citing a study that said up to 67 percent was spent within six months.
This year’s plan targets more lower-income households than the 2001 plan, so different retail sectors may benefit.
In 2001, home-furnishing stores did well. This time, Deutsche Bank analyst Mike Baker sees dollar stores and auto-parts retailers benefiting. But he thinks today’s consumers may be more conservative. Debt pressures are higher and the housing market is weak.
Baker says consumers in 2001 may have felt a “patriotic” duty to spend in the weeks after the Sept. 11 attacks.
The International Monetary Fund says the stimulus package will modestly boost growth and help prevent recession. But Merrill Lynch economist David Rosenberg says while the plan may add 0.7 percentage point to 2008 growth, it won’t prevent a recession.
He thinks consumer spending will rise only temporarily.