Tax rebates
That's what the Bureau of Labor Statistics reported last Thursday. 49% of the tax rebates were used to pay off debt, and 18% were saved. 3% could not be determined. Just goes to show that there's no quick way to stimulate the economy. It's takes time to get spent.
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.
Answer: A $600 "tax rebate" check written by the Treasury and a $600 check written by the Department of Health and Human Services.
In once sense, isn't every dollar spent by the federal government a tax rebate?
