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Rebate Checks May Not Do Their Job

April 28, 2008 02:50 PM
by findingDulcinea Staff
The government hopes the tax rebate that many Americans will receive Monday will revive the economy, but it may make little long-term difference.

30-Second Summary

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More than 130 million households will receive economic stimulus checks—about $600 per person and $1200 per couple—and those who opted for the direct deposit option, will see that money in their bank accounts starting Monday.

Some economists believe the $152 billion package will do a good job boosting the economy for several months, reports The Christian Science Monitor.

Others are more pessimistic.

“It’s a one-shot deal,” says Lacy Hunt, an economist with Hoisington Investment Management Co. in Austin, Texas. “At best, it will lift the economy for a little while.”

Another problem with the Bush administration’s plan is that current economic conditions will lead many taxpayers to use their rebate checks to pay off debt, and not as spending money.

“We’ve never done this in a period when American households are so deeply indebted,” said Jared Bernstein, an Economic Policy Institute senior economist. “While [saving the rebate] is a valiant thing to do, what you want them to do is spend it.”

Headline Link: Rebate checks may bring only short-term benefits

Related Topics: Where Americans will spend the money

Audio: 'IRS Making Sure your Rebate Gets Spent'

Opinion & Analysis: Pay off debt instead of spending

Background: The economic factors behind the stimulus package

Reference: Rebate checks explained by the IRS

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