In 2001, the US economy had entered a recession and the government issued rebate checks to most people in hopes people would run out and spend them and help stimulate the economy. While the effectiveness of that move haven’t been proven one way or another really, congress is currently looking to run a similar program in 2008. The House and Senate have each come up with different rebate plans that are currently under discussion: The House would like to pass a plan that gives 0 to each individual or ,200 to married couples with an additional 0 per child. The amount of rebates would be decreased for individuals who make more than ,000 annually or for married couples earning more than 0,000 annually. The Senate is working on a plan with slightly lower amounts, with 0 given to each individual and ,000 provided to married couples.
This plan also would provide an additional 0 per child. While the amounts are a bit lower in the Senate’s version of the rebate plan, more people would qualify for the money. The money wouldn’t start phasing out until income levels are about twice the House limitations; and the Senate’s bill for the rebates would provide money to people on Social Security as well as our disabled veterans- people who wouldn’t qualify under the House version of the bill. Before the bill can be placed on President Bush’s desk for his signature, the Senate and House need to agree on a compromised version to present. If approved by the President, it would be unlikely for the Internal Revenue Service to issue checks until at least mid-May- until after the rush of the tax season has ended. In 2001, research teams tried to decide what kind of impact the tax rebates had by looking at changes in the government’s Consumer Expenditure Survey. It seems that somewhere between 20 and 40% of the rebates were spent in the first three months of receiving it; with almost all of it spent within nine months of receiving it.
In a separate study, it was found that credit card debt dropped considerably soon after households received their rebates- but within nine months it had risen again as people began putting new debts on their credit cards. What’s interesting is the number of companies that have been polling people to find out what they’ll do with their rebates if they get them. The idea is to spend it and stimulate the economy of course, to help pull us out of what could be a bad recession; but the polls are finding that the majority of people are looking to pay off their existing debt with the rebates. In fact, depending on the site offering the polls, I saw responses as high as 51% claiming they would use the rebate to pay off credit card and other debts; as as many as 36% claiming they would invest it into long term savings options. Of course, what people say they’re going to do with their money and what they really do with it are often entirely different things.
Have you ever planned to save a portion of your paycheck and gone out to dinner instead? Probably everyone has made the “wrong” decision with their money at least a few times in their lives, despite having the best of intentions. The polls looked at are by no means done scientifically as they’re just based on visitors to a particular website; but it’s still interesting to see how many people hope to pay off debt with their rebates. What would you do with yours?
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