Yesterday, the Congressional Budget Office concluded that its original estimate that 40% of the 2008 tax rebates would be spent during the first six months in which they were first received were supported by three studies that estimated the impact from as low as 33% to as high as 66%.
"Figure 1 shows a counterfactual path for monthly consumer spending, constructed by subtracting from actual spending CBO's estimate of the effect of the rebates. That estimate (that 40 percent of the rebates was spent) implies that the rebates raised the growth of consumption in the second and third quarters by 2.3 percent and 0.2 percent, respectively, but reduced it by 1.0 percent in the fourth quarter, when the distribution of the rebates ended. As the figure shows, by itself simple observation of aggregate consumption over time may not detect the effect of rebates; no spike in spending corresponds to the spike in income."
So the rebate helped the economy for a quarter or so, but not enough to write home about.
At least it only cost $152
At least it only cost $152 billion...that latest recovery bill doesn't seem to be helping much either.
That money would have been
That money would have been better allocated into something like rebates for buying renewable energy or expanding mass-transit in medium-to-large sized cities. We need to make major forward-looking investments in infrastructure, not just fixing a patch-and-mend infrastructure strategy. We need mass transit that exceeds needs so that we can encourage its use and be in good shape as the population increases. Just like the health care in this country, our infrastructure policy seems only suited to fixing things once they've gone wrong rather than preventing things going wrong in the first place.