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.

[yongamerica]

Who was interviewed for this article. The stupid check couldn''t cover gasoline for my family for a week.

What an obscene Joke! The total amount of refunds payed to the American public didn''t even equal 20% of the tax breaks given to the rich by Bush and his Oil Co.

[barbaram99]

It is sad that America can''t do better.
As a Nation We DON''T
make the things we wear,use,etc.
We used to.
Today WE DON''T.
Go ahead look at what is yer home. There is ye will find made in .MADE IN CHINA om Dell mouse. On my ext TV card, assembled in Taiwan. Yep. I paid top dollar IN 07 so I can watch over the air TV in both formatsI used mine to add to my library. Vista. toldyouso12 there is/was toldyouso21. She made alot of sense to this Mainerin Seattle. We could help our Nation by doing the right thing. I am against war in any form. We have needs here. As Mainer I was taught to clean out our Yard before telling others to. America ye hear. Ye never learnt yer lessson. TIME TO CLEAN HOUSE.

[keithle1]

"..BUT BOOST MAY NOT LAST."

You don''t say, Really.
**********************
popstom1 is excited by the prospect of a third Bush term. McCain really turns him on.

[popstom1]

the one''s that need it don''t get it so f-k all of them

[pvperson]

Neo-cons, Hypocritess, Warmongers.

Goal of the Oppressers. Burn the Consitution.

McSame 08!

[babooph]

Endless propaganda over the "stimulus"-a quick "whitewash" over the massive tax cut the rich got-sold as tax "reform".The poor have no $ THAT IS WHY WE SAY POOR!!THat leaves the middle class to pay the bill!!!!!!

[karenaolson]

If the Government really wants to help the economy, get us oput of IRAQ. Join us to stop the decay of America www.theoandavirus.com

[jimfinster]

DemsUnity:

I notice that you neocons spend a lot of time attacking Obama. But I never see an explanation of why we should vote for McCain. What is so great about McCain? Why should I vote for him? He looks like an old (and I do mean old) re-run of GWB.

[tootall10142]

The US government sent 17 billion in foreign aid to africa the last six to ten years and now they want to stimulate our economy,but they never sent one seed one tractor or one agriculture scientist to africa so line up and get resdy to get bent again this year.maybe just maybe some one might mention this to which ever political leopard gets elected this year.

[babooph]

Lets have the 10 years of $15000/year cash in hand the rich got-then the rest of us can buy Chinese stocks & reap some of the fat cash the rich got.

[oneworldusa]

Posted by toldyouso12 at 01:48 AM : Jun 28, 2008

-Amen.

My power company just got approval to increase its rates today or yesterday by 18.3% starting JULY 1!!!
Meanwhile, the CEO, Thomas Farrell, received an over 100% increase in his pay between 2006 and 2007. What''s wrong with this picture????

[tmittelstaed]

"Dems never met an issue they did not want to spend on"

Rot and rubbish, it''s as accurate as saying that Repubs never met a **** or a bvtthole they didn''t want to stick their tally vackers into. As so many of the Repubs have done so in the last few years. Even Rvsh Limb-haw was a drug addict for a time.

It is way too soon to know if the stim checks are going to be good or bad for the economy. Our family is one of the few where the planets aligned and we got *** near $2K. As soon as I got it in the mail I hid it and our tax refund check in the deepest hole I could find because I thankfully am married to a wife who believes that the money we have to spend is what is displayed on the balance of the ATM machine when she gets cash. After the property tax bills come out in November I''ll deposit them in the morning and stop at the county office and pay the tax bill an hour later. The bank balance will end up very little changed and we will have a roof over our heads for another year. I hope that helps the economy out somehow.

[hermitdave]

GET real, do the filthy rich friends of George Bush care about the average American? This sounds a lot like the "LET THEM EAT CAKE" to me.

[toldyouso12]

And like usual, even with this stimulus pkg--the Rep. wanted a much lower amount--but once the Dems got to spending--they wanted to spend more and more and more and more and more. Even with the war, the added BILLIONS to the spending each time. Dems never met an issue they did not want to spend on--if you want them on board--just tell them you will let them spend money--it some sort of political addiction. They may hate your project--but if you let them spend...they''ll give you even more money than you wanted. THIS IS A VERY SAD, BUT TRUE FACT ABOUT DEMOCRATS.

[toldyouso12]

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.

Posted by BajaJohn1 at 01:03 PM : Jun 27, 2008

You are right to a point--but tell the truth--the Democrat will give the man a loaf of bread that pound of butter but also warn the man: We can''t give this to you, if you get on your feet--we only give this to you if you stay helpless. So the man has a choice--starve under the GOP or tough it out and find work--or get fat under the Dems--but never work and become a welfare family. If you know the rules of welfare--you''d know how many people got trapped in it--and every time they tried to help themselves, they were penalized for not sticking with the program. (you could not marry, or own more than 1200.00 in any real property, nor a car worth over more than 1000.00--if you got a welfare check. IN fact, in 1983, your net worth could not be over 5000.00 total or you lost the benefits. The "Bread and butter" scenario is a death trap--not to mention, that many who start off taking it as a help, end up seeing it as their right to have. Both the Dem and Republican models are flawed--but one can put fire in your azz due to desperation, while the other way is a slow death by coddling.

[toldyouso12]

"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. "

That''s just it kilroy, you CAN''T exclude the price of gas and other price increases, because those day to day horrors are where many will be spending this "stimulus". That is like a woman buying an outfit and systematically excluding the costs of the store, mfg, middle men, designer, etc until she can pretend her 1200.00 outfit really only cost her 10.00, once she eliminated all the other mark ups.

Can''t be done. Tell you what--factor in gas, higher food, utilities, credit card interest rates, transportation, medical expenses, etc--then tell us how negative the REAL growth number is--unless people stop having to pay all those things when they get a stimulus check. LMAO

[toldyouso12]

"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. "


At least Bush is smart enough to resist another package right now--it is all smoke and mirrors. Anyone with sense knows that if a person does not have money to pay their bills today and you give them the money to do so--then after that money is spent...THEY STILL DON''T HAVE MONEY TO PAY THEIR BILLS.

The fact is, after the stimulus, they will need another and another and another and another--maybe checks about every 2 months. Lets see, 168 Billion X 6?

Giving people money to spend is dumb, especially when that money is printed and has a backing of NOTHING--because borrowing 168 billion dollars to give away not only is a bandaid and very temporary--but the use of that money sends inflation through the roof. People will get those checks just in time to spend most of them on gas. Because that is what inflation is--as the dollar goes down, things have to cost more to pay for stuff. We just made up 168 billion dollars to spend--and gas is now 4/gal and rising. NO surprises there.

[toldyouso12]

"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."

Checks of 300.00 to 1200.00 sent net incomes up by the largest amount in 33 years? That is scary and it says a lot about how this country works. If people have not had a yearly increase in after tax salary for over 33 years, *** and who have they been working for?

[jntlw-2009]

This article is not even typical DC spin , it is a blatant lie. I have not spent my $600 yet because I''m unemployed and sill need it for food and gas and not some "big purchase". Most are either paying off credit card debt, putting it on their mortgage so as not to default, or using it for food and gas. No one is believing this story at all! Who do they think they are fooling?

[drew30319-2009]

Do you have a favorite charity?

I have one.

If you don''''t have on then let me know and I''''ll post he name of mine.

Posted by Mr_totten at 07:40 PM : Jun 27, 2008
----------------------------------------------

I''m the founder of a non-profit charity that I created in memory of my daughter and we *really* need donations right now if anybody is looking for a charity! We have zero paid staff and a 97% efficiency.

Check out our website and our mission at JenniferAnn.org.

Drew Crecente,
Director, Jennifer Ann''s Group
www.JenniferAnn.org

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