President Bush and Federal Reserve Chairman Ben Bernanke on Thursday embraced calls for an economic stimulus package to avert recession. Although Republicans and Democrats differ over what provisions should be part of any economic stimulus package, there is widespread agreement that tax rebates along the lines of the $300-$600 checks provided in 2001 are likely to be part of the measure.
I remember the last stimulus package when the government threw money at me. It wasn’t very stimulating. In fact, the thing I remember about it was the date it arrived in the mail. I received my government check on September 11, 2001.
I was in the military and couldn’t pick up my mail or leave work to cash a check. The tax rebate check was in my mail. The banks were closed by the time I was on my way home from work. I paid the fee at a local big box store to cash the government check, then filled my car with gas using my credit card. I, like millions of Americans was unsure what disruptions the economy would sustain. It may be paper, but I wanted cash in my pocket.
Five months later when I was filling out my taxes, I couldn’t even remember the amount of the check. I guessed the maximum amount I could have received ($300) for my income tax return. Then calculated the income tax I would pay on that amount. The actual amount of the check was less than $300. It probably cost the IRS more to recalculate my taxes than the monetary value I received. The amount I received then would roughly pay one electric bill for my house. Today it would buy two tanks of gasoline or pay for grocery shopping.
It is an interesting concept though. Throw chump change at the general populace. Of course they will spend it. With today’s attitude it will be treated like “found money”, a windfall above their normal budget. The government is hoping that the money is blown quickly and decisively on trivial retail junk. There is always the possibility they will use it to pay a pre-existent bill, buy groceries, or heaven forbid, even save it for an emergency.
If it happens soon enough and in sufficient volume, it may help turn around retail sales for one possibly two quarters. Only if the government times it perfectly. Don’t expect to see a check until the near the end of a fiscal quarter. That will give people time to spend it in 2 quarters, the last of one quarter and beginning of the next quarter. It could stimulate two accounting periods, if people buy things other than food and fuel.
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