Checks intended to 'head the recession off at the pass'

By M. Scott Carter

Transcript Staff Writer

MOORE -- Beginning next Friday, the check's in the mail.

At least that's what the Internal Revenue Service says.

Starting May 2, more than 130 million American families and individuals will begin receiving federal tax rebate checks from the government.

Billed as a way to "jump-start" the stalled U.S. economy, the rebate check was a bipartisan effort from both Houses of Congress and President George W. Bush.

Their plan: inject about $150 billion in consumer spending back into the county's financial system which, they say, will help prevent an actual recession and spark an uptick in spending and confidence.

"Letting Americans keep more of their own money should increase consumer spending, and lift our economy at a time when people otherwise might spend less," Bush said earlier this year.

A concept which, one University of Oklahoma political science professor says, might actually work.

"The main reason (for the rebate) is to get money flowing into the economy and to prevent a recession," said Glen Krutz, associate director of OU's Carl Albert Center and associate professor of political science. "And while technically we're not in one, we are in a slowing economy."

The stimulus package, Krutz said, is a way to "head the recession off at the pass."

"I'm not convinced that it will have a huge impact," he said. "But I believe it will have some effect. I think there will a blip up in consumer spending. The trick is how concentrated it will be."

Under the proposal, qualifying single filers -- those who make less than $75,000 per year -- will get rebates of up to $600.

Qualifying couples -- with an annual income of less than $150,000 -- will get rebates of up to $1,200, plus $300 per dependent child, with no maximum on the number of eligible children.

Taxpayers who owe no income taxes, but earned at least $3,000 in income from Social Security and veterans' disability, will get rebate checks of $300 for individuals and $600 for couples.

And while a few extra thousand dollars in the middle of the year is appealing, for some families those tax rebate funds might not make it to the electronics store.

Especially not with gas at the $3.50 per gallon.

Instead of splurging, many area families say they will either be saving their rebates or using the funds for necessities, such as clothes, food or, yes, even gas.

That's the case for Maylene and Steve Sorrels or Moore and their 10 school-aged children.

"If we have anything left after a truck payment, it will probably go for clothes and shoes for kids," Maylene said.

"I know Steven would like a life-time hunting and fishing license and I'd like to have a zoo or science museum pass, but the rest might just be put up and held on to until school starts."

While the Sorrelses were told to expect a large rebate, Maylene said they won't believe it until they have the money in the bank.

"We were told we were going to be getting one," she said. "But we sure don't want to hold on to false hopes."

In Norman, Pioneer Library spokesman Gary Kramer -- who said he's expecting a $1,200 rebate -- plans on socking his check in the bank.

"We'll probably just put it in savings," he said. "We just purchased a vacation home and it just makes me feel more fiscally responsible to save it -- at least for a week."

A few residents said they would spend the money -- should they get a check.

Brenda Roberts, the executive director of the Moore Chamber of Commerce, said she and her husband Dave would like to use the funds to renovate their kitchen.

"Oh there are 1,000 things I would do with it," she said. "I'd like to invest in the kitchen, do the whole schmear: the floor the cabinets and the counters -- but I'm not sure we're gonna get a rebate."

It's taxpayers like the Robertses, Krutz said, who federal officials are hoping will spend their rebates.

"I think they are after new people to engage in new spending," he said. "And not necessarily to make ends meet."

And though Krutz said the primary target for the rebate was the country's middle class, the $150,000 cut-off level for couples "is getting up toward the upper middle class."

There is some evidence, he said, that shows many Americans will spend their rebates on non-budgeted items. But as the money reaches those in the higher income levels, Krutz said he "wasn't convinced those people will go out and spend" their rebate checks.

"People in those higher income brackets tend to save," he said.

Yet even though a vast majority of Americans will probably see some type of rebate, some taxpayers will have their rebate reduced, or might not see one at all.

Taxpayers who have back taxes, certain other debts or delinquent child support and student loans will see their rebate reduced or redirected. In such cases, the IRS will send a letter to the taxpayer explaining the reduction.

Whatever the case, the impact of the rebate probably won't be known for a while, Krutz said.

"It could be several months before it all gets out. And there are two ways to look at that: One, it spreads out the benefit. Or, two: it spreads the benefit out so much that the benefit it's negated. That's something we'll have to wait and see."

But should the results be positive, Krutz believes lawmakers will use the idea again.

"I think it's something we will see more of," he said. "I do believe it will be used again if the economy slows down. This time, both parties jumped in. The view was it was gonna work."

Just how much?

"That's unknown," he said. "Honestly, it's not ideal in terms of fiscal management. The deficit will go up some. And it's not as if a little stimulus package will negate the whole subprime mortgage crisis."

M. Scott Carter 366-3545 scarter@normantranscript.com