Economic Stimulus Spending: Expecations vs. Reality

Written by nickel - 15 Comments

Just over a week ago, USA Today ran an interesting piece on where consumers plan on spending their economic stimulus tax rebate. They also compared it to how people actually spent their rebates back in 2001.

For starters, this is how people say they’ll be spending their current rebate:

23.3% - Keep in savings account
21.4% - Apply to credit card bills
6.5% - Car payment
5.1% - Home repair
5.1% - Gas/energy bills
4.2% - Buy things for the house
3.7% - Small daily expenses
2.3% - Buy clothes for kids
1.9% - Buy food/groceries
1.4% - Buy clothes for self/spouse
1.4% - Buy consumer electronics
1.4% - Apply to mortgage payment

From an economic standpoint, that doesn’t sound very stimulating.

But wait… What can history teach us?

Here’s a look at how people actually spent their rebates that last time around. The percentages were expressed in non-standard way, so I’ve just ranked them from greatest to smallest:

1. Movies
2. Computers
3. Drugs/sundries
4. Books
5. Women’s clothing
6. Apparel (presumably not including women’s clothing)
7. Electronics (presumably not including computers)
8. Kitchen appliances
9. Restaurant meals
10. Toys

Hmmm… That’s more like it.

Rampant consumerism, just like the bigwigs in Washington envisioned it.

Published on May 15th, 2008 - 15 Comments
Filed under: Economy
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Comments (scroll down to add your own):

I think some people are a little short sided concerning the rebate. You say the precentages don’t sound very stimulating. However, paying down a credit card or other bill can be very stimulating. For instance I plan on paying off two bills that cost me a total of $100/mo. That’s $100/mo extra I’ll be able to spend. Hopefully I won’t fall back into my old habits and spend it, but statistically speaking I will.
Comment by JB — May 15th 2008 @ 12:57 pm
I think you nailed it. What people say they’ll do and what they actually do are rarely the same. I think most people try to give the “right” answer when asked a question by a pollster.

It will almost be a relief when everyone has spent their rebates and we can get back to our regularly scheduled recession. Let’s just get through it already.
Comment by devil — May 15th 2008 @ 1:18 pm
I feel that this is the same situation as making a New Years Resolution. People always have the best intentions but when the time comes or after awhile, they give in to something else.
Comment by Financial Goal — May 15th 2008 @ 2:20 pm
Movies were #1? Is that because taking your family to a movie theater is like $1,200 these days?
Comment by Eden — May 15th 2008 @ 3:03 pm
They should do the same survey around where I live. The top 5 list of where the stimulus money is going would look like this:

1. Cigarettes
2. Busch Light 30-packs
3. Lottery Tickets
4. WWE Pay Per View
5. Ridiculous and huge spoilers to put on the back of old and underpowered front-wheel drive cars.
Comment by Jeremy — May 15th 2008 @ 3:40 pm
I said I was going to pay down my student loan debt with it.

But I actually spent it on a necessary home repair (replacing our furnace).

I stimulated the local economy. Call me a proud American
Comment by paidtwice — May 16th 2008 @ 7:23 am
Mine paid off that blasted Bank of America credit card! Wooooo Hooooo!

http://www.thewisdomjournal.co.....-debt-fre/
Comment by Ron@TheWisdomJournal — May 16th 2008 @ 8:56 am
paidtwice: I hate to burst your bubble, but… You would’ve fixed your furnace no matter what, right? If so, then you didn’t actually stimulate the economy and more than without the rebate.

Comment by nickel — May 16th 2008 @ 9:12 am
@ JB:

Paying down your credit card debt is stimulating for you, but that $100 / month in interest that you were paying was going to someone else who was spending it. It didn’t add new money into the financial system.
Comment by Mike — May 16th 2008 @ 12:15 pm
i think the tax stimulus thing is a crock.Ours was supposed to be deposited today and today I find out that because we used a online tax preparer and got a RAL that we will have to wait on a paper check.I for one will be changinging my w4 to 10 dependents and will not worry about filling at the end of the year that will be my stimulus.I will not file a fedral income tax from now on.
Comment by Ron — May 16th 2008 @ 12:40 pm
I decided to stimulate my own future economy. My stimulus check along with some extra money I had stashed away was invested in an S&P 500 index fund, a total stock market index fund and an International Stock Index Fund.

My Personal Economy is the only one that matters.
Comment by Chad — May 17th 2008 @ 4:30 pm
Already been deposited in our checking account, qued half to go to our credit union savings account, other have is qued for the next Credit Card monthly payment. I’m from the school that daddy said, “pay yourself first”. Old habits are hard to break. Do what you want with it. . .I did.
Comment by steve — May 19th 2008 @ 12:36 pm
I was in the same boat, we were supposed to receive our stimulus payment by the 16th of May and because we had our fee deducted we won’t get ours until the end of June. What a crock. Just another way for the government to string you along a little longer. I guess that is punishment for filing my return in January, I should have waited until April and then I would have known.
Comment by Diann — Jun 13th 2008 @ 2:22 pm
What stimulus check? Those of us who owned taxes had this amount deducted from the actual amount - I ended up owing $14.27 - anyway the government ended up paying it self. Did anyone not see that coming?
Comment by Cynthia — Jun 24th 2008 @ 9:32 pm
Cynthia: That’s not the government paying itself. That’s you paying the government what you owed. There’s a big difference.

Comment by nickel — Jun 25th 2008 @ 1:30 pm