Share this story
Close X
Switch to Desktop Site

Would tax rebates work?

Next Previous

Page 2 of 4

About these ads

In 2002, once the printing presses started to roll, the government printed as much as $8 billion a week in checks. It took ten weeks to get them all in the mail.

"It may be too late, but it could mitigate the severity of the downturn or even jump-start us out of a recession," says Mark Zandi of Moody's "But I think that stimulus is helpful."

Mr. Zandi, who is skeptical Congress will act quickly, estimates the proposed package could add $80 billion to real GDP in the second half of the year. That translates to about 1 percentage point of annualized growth. He also estimates that would support some 400,000 jobs.

Economist Ethan Harris of Lehman Brothers offers a slightly different analysis. He estimates that a stimulus package of $100 billion could add 0.8 percent growth to the second quarter and 0.2 percent to the third quarter. "Perhaps even more important," he writes in a research report to his clients, "the policy would provide a psychological boost to the economy."

The 2002 rebates, however, were not as successful as anticipated. Recipients used more money than expected to pay down debt and contribute to savings. Of some $38 billion in rebate checks, only $8.36 billion was spent, according to a University of Michigan survey.

"The survey suggests that if the circumstances are similar, a stimulative package may not have the magnitude of stimulus one might hope," says Joel Slemrod, a co-author of the report and an economist at the university in Ann Arbor.

Next Previous

Page 2 of 4

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.