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Consumers Express Caution About Spending Rebate

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By ELLEN SIMON, The Associated Press

Published: January 19, 2008

NEW YORK - Is an extra $800 in your pocket enough to change the course of the ailing economy?

President Bush, Treasury Secretary Henry Paulson and members of Congress seem to think so. Washington is talking about issuing tax rebate checks in hopes of staving off a recession.

And people across the country, many of them struggling to pay bills, staggering under credit card debt or worried about their financial futures, aren't about to turn them down.

"I would probably take that money and breathe a sigh of relief for one month," said Jennifer Simon, who works at a small communications firm in Long Valley, N.J., and spends $1,500 a month on child care.

"It's not a permanent fix," she said, "but I wouldn't send it back."

Taxpayers got smaller rebates, $300 per person, under a similar plan in 2001. There is debate in economic circles - as usual - about whether those checks warded off recession or went straight from the U.S. Treasury into Americans' savings accounts.

This time around, although some people may put the rebate toward a big-ticket item such as a flat-screen TV, many echo Ginger Scott, a home-health physical therapy worker in Kansas City, Mo. She says she wouldn't buy anything exciting.

"I think I had too much exciting previously," said Scott, 52. "Exciting will kill your budget." Instead, she said she'd pay off a credit card bill and save what's left over.

In interviews, Americans gave a range of ideas for how they'd spend the money, some of them reflecting the pinch of a difficult economy in which the costs of food and gas are rising and jobs are harder to come by.

Take DaMel Nixon, 33, a mail house quality control supervisor in Lansing, Mich., who used to be an avid buyer of music but is unlikely to use his $800 to splurge on CDs because he needs money for gas.

"I'm going to need that $20 to put in the tank," he said.

In Fargo, N.D., Doug Benson said he would spend half of the $800 on bills and half on new beds for his children. In New York City, Landy Ung said she would plow the money into her startup Internet business as an incentive for her salespeople.

At a mall in Madison, Wis., Antonia Rivera said she'd would love a new pair of snow boots, but said she'd save the cash anyway.

She hopes to retire from her job as a supply clerk at the University of Wisconsin Hospital next year, but fears she may not have enough money.

So she's cutting back on all her purchases. "If I need it, I look for the best price," said Rivera, 68. "If I don't really need it, I don't buy anything."

In Kansas City, Jenise Lemmones said she'd let her 8-year-old granddaughter, who lives with her, call the shots: "She just likes to go to McDonald's and the movies."

When the 2001 rebates went out, two-thirds of the cash was spent within six months, according to a paper published by the National Bureau of Economic Research, a private research group that serves as the national arbiter on such matters.

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