May 6: Economic Risk - Americans Divided Over Whether Rebate Checks Will Stimulate the Economy

Location: Rochester
Author: RiskCenter Staff
Date: Tuesday, May 6, 2008

Rebate checks began hitting bank accounts last week and will be arriving in mailboxes with the hope that they will stimulate the economy. Americans, however, are split on whether they actually will do so. Just under half (48%) of U.S. adults do not believe that spending their tax rebates will help stimulate the economy while 45 percent believe that the checks will stimulate the economy.

These are some of the results of a nationwide Harris Poll of 2,529 U.S. adults surveyed online between April 7 and 15, 2008 by Harris Interactive.

There is also a political difference in what Americans believe with regard to the rebate checks. Perhaps not surprisingly, Republicans are more likely than Democrats to think these checks will provide an economic stimulus (62% versus 36%).

Independents, however, lean a bit more towards the Democrats on this issue as half of Independents say the checks will not stimulate the economy while two in five (42%) believe they will. While a 53 percent majority of Conservatives also believe these checks will help stimulate the economy, this number is a lot lower than it is for Republicans.

Almost three-quarters of Americans (73%) believe they will be getting checks, while 14 percent say they do not anticipate receiving one and 13 percent are not sure. Those with household incomes between $35,000 $49,999 and $50,000 - $74,999 are the income groups who are most likely to believe they will receive these rebates (81% and 85% respectively).

How the Checks will be Spent

While the government hopes that the checks will be spent to spur the economy, the reality may be quite different. Almost two in five (38%) say they will use some of the rebate checks to reduce their non-mortgage debt and paying off bills or credit cards followed by 35 percent who are going to add some of the rebate to their cash savings.

In fact, 21 percent of those getting checks will be using somewhere between three-quarters and the entire rebate amount towards reducing debt. One in five of those who are getting checks say they will use some of their rebate for other things they have wanted to buy (21%) and taking a trip for leisure purposes (20%). Further down the list are spending on home improvements (17%) and going to restaurants or dining out (16%).

One in ten or less of those getting checks say they will spend part of their rebate check on: technology devices, such as a computer or TV (10%); entertainment events or devices (10%); donating to charity (8%); education for themselves or their family (6%); paying down mortgages (5%); investing in stocks or mutual funds (4%); and indulging in a spa treatment (2%).

So What?

As it stands now, much of the rebates will end up deposited in savings or being mailed to credit card issuers. But, with retailers ramping up advertising geared towards helping Americans to spend these rebate checks, some of the best intentions of saving or paying off debt may change. If it does, that might help jump start the economy. By the end of the summer, what Americans do with these checks will be clear and we’ll see where we stand then.