Consumers Respond to Rebates

Congress passes the stimulus plan, but what will taxpayers do with their unexpected cash?

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Now that Congress has sent the much anticipated $152 billion stimulus package to President Bush for his signature, most taxpayers are all but assured of receiving checks by early summer. The bill gives cash rebates to consumers, increases the limits on home loans that can be backed by Fannie Mae and Freddie Mac, and provides tax incentives for businesses.

While the goal of the package is to stimulate the economy, a handful of surveys released over the past week suggest that most Americans will save the money or use it to pay off debt instead of spending it. Proponents of the legislation say that even using the money in those ways will help the economy in the long run.

Here's an overview of what the stimulus package means for consumers and what they are likely to do with their windfall:

• Americans who earned more than $3,000 last year but whose adjusted gross income is less than $75,000 ($150,000 for married couples) will receive $600 each ($1,200 per couple), in addition to $300 per child.

• Seniors and disabled veterans will also receive $300 rebates, which weren't in the original House plan but were added by the Senate.

• For many consumers, the rebate checks will go into paying off debt or building savings. According to a survey by American Century Investments, 36 percent of respondents said they would use the money to pay off debt, 25 percent said they would save or invest it, and only 27 percent said they would spend the money.

• When discussing January's weak retail sales, National Retail Federation spokesman Scott Krugman said that consumer-oriented sectors would benefit from the rebates even if they weren't spent right away. "Whether they paid down debt or put it into savings," he says, "it's improving the consumer outlook and spending power either in the short or long term."