Stimulus Checks Making Economic Waves

Payments Give Huge Jolt To After-Tax Incomes And Consumer Spending But Boost May Not Last

(CBS/AP)  The millions of economic stimulus payments gave a massive jolt to household finances in May, sending after-tax incomes up by the largest amount in 33 years.

The payments helped boost consumer spending by the largest amount in six months.

The Commerce Department reported that disposable incomes, the amount left after paying taxes, surged by 5.7 percent last month. It was the biggest increase since May 1975, reflecting $48.1 billion in rebate payments made last month. The surge in incomes helped boost consumer spending by 0.8 percent, the biggest gain since last November.

The administration is hoping that the $106.7 billion in stimulus payments being made this year to 130 million households will be enough to offset serious drags on the economy at the moment from a prolonged housing slump, a severe credit crisis and soaring energy bills.

However, economists are worried that the boost from the stimulus checks will be only temporary and once the checks are spent, the risks of the economy falling into a deep recession will increase.

Worries about the economy showed up in turbulent financial markets this week with the Dow Jones industrial average plunging by nearly 360 points on Thursday to the lowest level in almost two years. Investors were worried about the impact soaring energy prices and a slumping financial sector will have on future growth.

The rebate checks are part of a $168 billion package of tax relief for individuals and businesses that Congress passed in February at the urging of the administration in an effort to give the economy a boost and ward off the threat of a deep recession. The payments began on April 28 and are scheduled to be completed by mid-July.

The Bush administration currently is resisting Democratic calls for a second stimulus package even though economists are worried that the effects of the boost will prove temporary at best. They fear the stimulus will fail to prevent a serious slump in the second half of this year as the economy's troubles from housing, a severe credit squeeze and soaring energy prices mount.

For May, overall incomes rose by 1.9 percent after a 0.3 percent rise in April. Part of that increase reflected the portion of the stimulus payments that are going to low-income individuals. But the bigger impact showed up in after-tax incomes, which shot up by 5.7 percent in May after a 0.4 percent rise in the month before, reflecting the bulk of the stimulus payments, which represent a tax break for most households.

The hope is that the stimulus payments will do the trick to bolster consumer spending, which accounts for two-thirds of total economic output.

For May, consumer spending jumped by 0.8 percent, double the 0.4 percent gain in April. Excluding the effect of rising gasoline and other price increases, inflation-adjusted spending rose by 0.4 percent in May, the biggest one-month increase since last August.

A closely watched inflation gauge tied to consumer spending was up 0.4 percent in May but excluding energy and food, the increase was a much smaller 0.1 percent. Over the past 12 months, core inflation excluding food and energy is up 2.1 percent, just above the Federal Reserve's comfort zone.

The Fed earlier this week brought an end to an aggressive string of interest rate cuts designed to protect the economy from toppling into a deep recession, citing increased worries about inflation pressures coming from surging energy prices.

The big increase in after-tax incomes based on the surge in stimulus payments pushed the personal savings rate to 5 percent, the highest level since May 1995. Personal savings represent the amount of after-tax income consumers have left after deducting their spending for the month.

Meanwhile, the Fed was scrambling to prevent a "contagion" from infecting the nation's financial system when it took unprecedented actions to save several Wall Street firms, reports CBS News correspondent Peter King.

Newly released documents show Federal Reserve officials felt an immediate collapse, particularly at Bear Stearns, would mean a contagion, a spread of financial shock that could ruin the financial system and send the country into a recession, King reports. The Fed agreed to back up the $30 billion in JP-Morgan's takeover Bear Stearns, and said it would make emergency loans available to keep other large firms from going under.

[fstop100]

Sounds like bull, my check was sucked up in gas. All we did was give the oil companies more profits.

[faith_in_w]

My check stimulated my bank account. There are some nice antique hotwheels on E-Bay I may bid on and $600 may get me 2 or 3.

[u-r-right]

You have got to be kidding me. What a load of bull. That stimulus check needed another zero to really make a difference.

[gangesdak]

Econimic Waves! Just wait a month. The same people will say that it did not do much. Only Govenment agencies and some phony ecomomists will say for it. And even if it did some good for a couple of weeks, it has dried out already in the sand dunes of gas prices. People has bought gas station gift cards, and the money has been shipped in big barges to OPEC. Thanks for the great enonomic idea from the President. Who says he is not an idea man.

[sistatee-2009]

This is pathetic. The government writes bad checks to "stimulate" the economy. The most BROKE institution on the face of the Earth is the United States! We as a people are nine-thousand-billion (nine trillion) dollars in debt, and we look to the borrower of that money for HELP? Unbelievable.

[lemonskink]

The ridiculous stimulus checks issued under the authority of this countires most ridiculous president ever, won''t work at all. It fattened the oil companies pocket though, because that is right where it''s going.

[antoniof123]

The Bush stimulated, amounts to pissing on a forest fire.

[pvperson]

Gosh, I''m sure glad those checks saved our economy. Why just yesterday we saw the magnificent impact they made on the stock market. Keep up the good work GW, by December we should ALL be dead broke.

[newsjunky5]

The stimulus package does what it was designed to do - put off the inevitable recession (at best) until after Bush leaves office. You can''t argue with the definition of a recession (two quarters of negative growth?), but supporters/oilmen can make excuses forever about why Bush "didn''t cause it."

[mcvet]

It might have helped but with the cost of everything mine was gone the next week.

[downtowner97]

The government has now shown us how nice it would be if they didn''t take our money. If we voted for libertarians like Ron Paul across the country, this euphoria could be permanent.

[mcvet]

This is pathetic. The government writes bad checks to "stimulate" the economy. The most BROKE institution on the face of the Earth is the United States! We as a people are nine-thousand-billion (nine trillion) dollars in debt, and we look to the borrower of that money for HELP? Unbelievable.

Posted by SistaTee at 11:44 AM : Jun 27, 2008

Well yeah that happens when you elect INCOMPETENT People, hand THEM a balanced Budget and a SURPLUS and THEY proceed to Borrow to give Tax Breaks and run a War that NEVER had to be... yeah those things happen. The Stimulus was needed but BORROWING it is really stupid! Sieg Heil Bush

[analogtwin]

We''re screwed! Thanks GW!

[imarltool2u]

if you got a stimulus check then your income is below approximately $150K. so now we know who, don''t we?

[alphaa10-2009]

CBS reports, "The administration is hoping that the $106.7 billion in stimulus payments being made this year to 130 million households will be enough to offset serious drags on the economy at the moment from a prolonged housing slump, a severe credit crisis and soaring energy bills."
---

All three-- the housing bubble, the credit crisis and energy crisis-- can be traced to unregulated market speculation.

First, Moody''s issued platinum ratings for bonds which were heavily infected with junk. Moody''s since has confessed its abject failure of due dillgence.

Bankers took the bonds, knowing they were infected, and simply ran with them. For example, Bear Stearns smiled and passed the junky bonds along to the next sucker, pocketing its fees.

Oil commodities speculators pyramided the market just like the bad old days of 1929, knowing the market for oil could be stampeded if they pushed hard enough.

All three scenarios happened because regulators were not actively involved, protecting the interests of investors and the American people.

Exactly the same failure of diligent oversight happened with Enron, when retirement savings were lost without a trace to the criminal machinations of con artists Ken Lay (a Bush friend and contributor) and Jeff Skilling.

The fruits of Republican lessez faire policy are clearly rotten, and bring only disaster and more disaster. Bush is clueless, and McBush-- afloat with PAC money-- promises more of the same.

[sistatee-2009]

This is pathetic. The government writes bad checks to "stimulate" the economy. The most BROKE institution on the face of the Earth is the United States! We as a people are nine-thousand-billion (nine trillion) dollars in debt, and we look to the borrower of that money for HELP? Unbelievable.

[newsjunky5]

"I haven''''t received mine yet :( "

-------------------------------------

Are you registered as a Democrat? The White House has been doing this sort of thing lately. Even stopping careers of brilliant lawyers who didn''t belong to the same party.

[ajaxtheleast]

" . .and the big man wants the graphics off to
left of the copy as usual with maybe a bunch
of stars and of course throw in the statue of
liberty, our favorite broad, right? heh heh.

WAIT! THIS TIME HAVE HER ON A DAMM CHECK!

Almost got by me! Big man wouldn''t like that.


"just a sec" , , ,no I havent forgotten , ,

"Diik says a government building too , ,"

"just a sec" , , ,we already got stars , ,

"Diik says drop the damm stars and toss in

a whole flag and wants to know what you

think of all copy in caps."

[naucoming4u]

Well, it looks like the STIM-U-LESS checks are living up to their promises.

Oh sure, it won''t help Americans get out of debt any faster, no... rather it will not change many American''s debt whatsoever, if not slightly increase it! As that $599.99 flat panel TV does not include sales tax or delivery charge, or extended warranty, or any of the accessories that just has to be bought along with it.

The good news, however, is that China''s economy is getting a huge boost by these checks! Yay!
(sarcasm)

[jack3213]

How far do they expect 600 dollars to go? And what kind of idiot would spend it friviouslly in a bad economy? Either pay a bill or save it. This article is just another example of how stupidity gains ground.

[acolton1]

This whole Stimulus check was a bunch of POOP. It just went towards the national dept and will have to be repaid in the future.

It still boils down to the Bushie Administration is the biggest LOOSER Administration this country has ever had. DouschBag Bushies.

[wallyj16]

Stimulus Check- Bush''s Bribe to put his finger in the dam that is about to break. another massive failiure of the Bush Administration and the Democrats failiure to check them. I don''t pity Obama or McCain, I pity our children and their children who will pay for our own apathy. Is this what we are willing to settle for? We''re taking a trip to the shed again.

[alphaa10-2009]

The abject poverty of the Bush "stimulus"-- the rebates are only a fraction of the push a healthy consumer economy would provide.

After eight years in office, is this the Bush / GOP magic formula for economic prosperity?

Meanwhile, consider the detriments-- The $106.7 billion is only about ten months of spending on Bush''s War in Iraq.

At this moment, American taxpayers are still providing a lavish tax break to Big Oil!

Bush appears to be the same individual who once told a gathering of his wealthy donors that they were his political base-- "the Havemores", as he called them.

The Havemores, the upper five percent of taxpayers, appear to be the only people who have benefitted from Bush. Most of America has suffered damage from Bush and his misbegotten schemes.

[one-american]

The comments here by liberals clearly show that liberals are, by nature, pessimists - and nothing is ever accomplished by pessimists.

So when liberals pretend to talk of "hope" and "change", they really mean nothing, because they are spoken by liberals.

[alphaa10-2009]

CBS reports, "The administration is hoping that the $106.7 billion in stimulus payments being made this year to 130 million households will be enough to offset serious drags on the economy at the moment from a prolonged housing slump, a severe credit crisis and soaring energy bills."
---

All three-- the housing bubble, the credit crisis and energy crisis-- can be traced to unregulated market speculation.

First, Moody''s issued platinum ratings for bonds which were heavily infected with junk. Moody''''s since has confessed its abject failure of due dillgence.

Bankers took the bonds, knowing they were infected, and simply ran with them. For example, Bear Stearns smiled and passed the junky bonds along to the next sucker, pocketing its fees.

Oil commodities speculators pyramided the market just like the bad old days of 1929, knowing the market for oil could be stampeded if they pushed hard enough.

All three scenarios happened because regulators were not actively involved, protecting the interests of investors and the American people.

Exactly the same failure of diligent oversight happened with Enron, when retirement savings were lost without a trace to the criminal machinations of con artists Ken Lay (a Bush friend and contributor) and Jeff Skilling.

The fruits of Republican lessez faire policy are clearly rotten, and bring only disaster and more disaster. Bush is clueless, and McBush-- afloat with PAC money-- promises more of the same.

[trillion1]

GOP thinking. Put a quart of gas in a car and expect it to go 200 miles. bush and the GOP have dug us into an enormous hole and these checks are just more digging.

[midland666]

This is the same as stepping on the gas while on empty.,
you go faster until the gas runs out.

[radiob-2009]

Hmmm let''s see if we had instead of handing out "stimulus" checks and instead converted every auto to run off of natural/propane/methane gas which when converted from BTU''s to gallons equals .83 a gallon compared to $4+ a gallon of gasoline, how many jobs would we have created? And would not the creation of those jobs and the tax base from them payed back the "stimulus"?

[radiob-2009]

And neither party proposed doing this, why they are oil lapdogs.

[djberson]

I wonder how many people spent their $600 on cocaine and hookers

[pvperson]

"You wanna give money... back? To the taxpayer?....sidvicious

You seem to think the Feds had the money to give back. They didn''t, ever heard of the $9.4 trillion defecit? Republicans think all you have to do is print more in order to cover costs. Thats why the dollar is worthless and oil is sky high.

[one-american]

That''s the problem with Democrats-

they think that tax money belongs to the government.

So when Republicans talk about cutting taxes, or giving back money to the taxpayers, Democrats always say "how are you going to PAY for that?"

It''s the TAXPAYERS MONEY to begin with, Democrats!

Anyone who doesn''t understand that basis principal should NOT be any part of government.

[alphaa10-2009]

One-American said, "The comments here by liberals clearly show that liberals are, by nature, pessimists - and nothing is ever accomplished by pessimists..."
---

Then Bush must be the chief pessimist, because he has accomplished nothing but disaster.

But neither pessimism not optimism has anything to do with brain-dead failures of Bush policy. Bush failures are fact, and Bush failures are all around us.

In contrast, even conservatives thrived after eight years of Clinton, and were seen crying all the way to the bank, pessimists that they were.

By now, revival-style tent rants about proper attitude are wearing a bit thin, aren''t they?

Such speeches are also a process of denial. You look at Bush incompetence, criminality and disaster, and ask that we sing the hymn titled, "Now, We See Light at the End of the Tunnel"?

Bush and his supporters are anti-American, and are accomplices in criminal activity. They should be seen for what they are-- anti-patriots.

[missingamerica]

I can''t believe people give any credence at all to anything the Commerce Department says, since if you think about it AT ALL, the three departments that you MUST ensure stay "on message" in order to support the fiction of "trickle down" economics are the Department of Labor, the Department of the Treasury, and the Commerce Department.

An awful lot of people think that we are in a recession and heading for a deeper recession, and any impact the "stimulus" checks had primarily benefited "middle men" and offshore manufacturers, or the oil companies, or the financial institutions that perhaps got an extra mortgage payment before default set in.

The good thing is that with a couple of "executive orders" the next President can use the FISA law to find those wealthy Americans who are evading taxes and so make some attempt at stemming the ebb in tax revenue that accompanies a recession.

[gopack443]

This is no time for logic! it''s about getting reelected and preserving the bottom line of the company''s that pay for them elections.

[pvperson]

One-American....the government today spends considerable more than it takes in, that''s why there''s a deficit. You act like the Feds are sitting on some great mattress full of money, not so. They can''t pay their bills and are borrowing from China and Japan and other countries to fund all their activities, like the war. Understand?

[pvperson]

alphaa10.....HERE, HERE. You got it!

[one-american]

Posted by alphaa10 at 12:45 PM : Jun 27, 2008

No matter how much you lie alphaa10, you can''t change reality.

Go back to your drugs, fool.

[pvperson]

"republicans think they''''re good for it".....sidvicious

That must be why a democrat always has to bail them out. But then, your right, they THINK they''re good for it, but as usual they''re wrong about that too.

[pvperson]

"No matter how much you lie alphaa10, you can''''t change reality"....One-American

No, lying about everything is the republicans job and they''re good at it. You want to talk about reality, well, lets look at Bush and talk reality, OK?

[pvperson]

Consistency? Consistency? Consistency....sidvicious

Isn''t that what we''ve been suffering for the last seven and a half years? Isn''t that what has driven our country into the hole it in? Yeah, we really need more Consistency? Consistency? Consistency..

[pvperson]

Your wrong BajaJohn1, the republican would take the bread and sell it to someone in asia, then bank the profit overseas.

[pvperson]

I''m sure you are sidvicious89, I wouldn''t expect anything better from you.

[noloyalisti]

This is just a band aid. We need to address the real problem, privatization and lack of oversight of corporations which has led to out of control greed. It is time to get rid of medical insurance and privately owned oil companies, these things are just too important to leave to right wingers. The we get rid of ALL the right wingers in government because they are the source of the problem.

[tablink]

Most economists believe that at least 70 % of the economy is consumer driven. Yet powerful forces influencing government have a bias towards a supplier or "trickle down" system, as evidenced by tax breaks for the rich, because of the belief that some of them will be potential investors and will cause employment statistics to look good.

Clearly it seems logical that greater consideration should be given to bolster the equity of consumers. Manufactured goods sitting on a shelf may make some investors richer, but will not do anything for the economy.

Many avenues are available to upgrade the wealth and disposable income of consumers. Those include the economic benefits of universal health care, education expense assistance, negative income tax, revival of some forms of welfare, better unemployment insurance, regulation of off shoring of jobs, and so on. Additionally some other activities which would help to improve the well being of consumers might include the %u201Cunprivatizing%u201D of some airlines, and the creation of a first rate national railway system as an adjunct to our national highway system.

Investments by American consumers through minor increases in taxes would certainly pay valuable dividends and prevent the regularly occurring freefalls of the economy which hurt both consumers and the rich as well.

[bobnjersey]

[That''''s the problem with Democrats-they think that tax money belongs to the government. Anyone who doesn''''t understand that basis principal should NOT be any part of government.]
[Posted by One-American at 12:43 PM : Jun 27, 2008]

it does once the money has been paid in taxes ... taxes are raised to pay the costs of running the government. at what point in the life of that tax dollar does it no longer belong to ''taxpayers'' and is the property of whom it''s in the possession of?

does anyone on the right understand the concept of a balance sheet ... income vs. expenses.

anyone who doesn''t understand this principle should be dis-allowed from representing anyone but themself.

[credibility2]

This is supposed to be about the stimulus check, not which party to vote for, or which party would do what with bread, etc. Back to point, the checks will offer little relief to those that have many things they can apply it to and realize that they don''t have enough to cover everything. Should it go to pay down personal debt, or buy medicine, food or gas, or should it be applied to the mortgage payment, or should it be saved, or spent on needed clothes for the kids, or not spent at all until the bottom really drops, or spent on replacing worn-out barely functioning appliances, etc.? Whether a person got $300, or $600, or $1,200 (couples) plus $300 for each kid, this isn''t enough to help the suffering during this difficult time.

[uscitizenvet]

The key word here is "give".
Sid, the difference between the parties is this: If a Republican sees a starving man, he [might] offer him a slice of bread; The democrat will give him a loaf of bread and a pound of butter until he gets on his feet. That''s the problems with democrats, they always want to "give" away everything instead of having people "Work for a living" and "get off welfare" ! As for me, I''m tired of supporting those that are too lazy to work and support themselves and always asking what the government can do for them. I like what JFK said though: Ask not what your country can do for you, ask what you can do for your country. VOTE McCAIN !!

[tryhonesty]

This gimmick is just another timed ploy by the RepubliCONs to get elected this Fall and delay "the piper from getting paid" (national debt). But, as gimmicks go, they do not work for the long term, and the long term problems remain. We need to get out of stupid very expensive wars brought on by stupid politicians (RepubliCONs-Bush Cheney) and invest in America''s infrastructure providing good jobs, vibrant economy, and hope for the future of hard working American families...

[alphaa10-2009]

One-American-- Your comment reminds me of the story told about W.C. Fields, when a woman informed him he was just a drunk...

Without batting an eyelash, Fields said, "I may be a drunk, but you are ugly. In the morning, I''ll be sober, but you''ll still be ugly."

Likewise, Bush failures are ugly. They remain ugly, whatever posters say on this forum.

Moreover, Bush failures are just as ugly now as they were yesterday. And they will be just as ugly tomorrow.

What part of the statement, "Bush is an anti-patriot, a criminal and the worst president America ever has had" do you not understand?

McCain promises more of the same-- much more. Because McCain is the kind of guy who looks at Iraq, and threatens a century more of the same. Who once said Bush tax breaks to the wealthy were unfair, but now says middle-class Americans must bear more of the same.

That is why many call McCain ... "McBush", instead.