New Mexico News
| Most Planning To Pay Off Bills With Stimulus Check |
| Posted by Peter Phipps (pphipps) on Jun 10 2008 at 7:48 PM |
Have you spent the $600? The $1,200? Or is the check still in the mail?
And which economy are you planning to benefit with your economic stimulus check — the greater, sluggish one groaning under the threat of recession, or your own personal economy?
Individual taxpayers making less than $75,000 and couples making less than $150,000 are looking at extra income — $600 for singles, $1,200 for couples and an extra $300 per child — to be in their pockets by the end of the month. This is the population taking the biggest hit in the monthly budget as it struggles to cover high food and gas prices, maybe sell a house, try to get credit or find another job. And this is the population encouraged to pretend Christmas has come early, splurge on a luxury and grease the retail wheels that could get the economy moving.
But will it work? And what are your plans?
Ever since President Bush signed the economic stimulus bill in February, experts, pundits and regular folks waiting by the mail box have been predicting the money's ultimate destination. It won't go toward flat screen TVs, MacBook Air laptops or front-loading Maytag washer/dryers — the kinds of purchases that would stimulate the economy, many said. No, it will pay bills; it will pay down debt — wise personal moves that won't put cash into circulation.
In a poll H&R Block conducted, 45 percent of taxpayers were planning to use their checks to pay bills, 21 percent to purchase necessities like groceries or car repairs, and 18 percent to invest. Only 16 percent were looking forward to splurging on electronics or a vacation. America's Research Group, JP Morgan and Goldman Sachs have all reported similar numbers.
Based on reporter-on-the-street interviews and responses to the Journal's request for reader e-mails, Albuquerque residents are in sync with the masses.
All it took was one visit from the mail carrier to decide the fate of Johnny Torres' check. He received it May 9 in the amount of $600.
“On the same day, I also received a bill from my mortgage company saying I was $596 short on my escrow,” he wrote in an e-mail. “If not paid, my mortgage would go up. You don't get much stimulation for $4.”
Others who responded said they were putting their checks toward their mortgage principles, paying bills, putting a cushion in the bank, paying property taxes and paying down credit card debt.
“Boring I know, but economically sound,” wrote one reader whose money is going toward his mortgage.
“Paying down the credit card is a slam dunk,” said Allen Parkman, professor emeritus of economics at the University of New Mexico's Anderson School of Business, but he doesn't expect much retail action among those with zero balances, either.
“People who are more comfortable are quite capable of covering their necessities,” he said. “Those may go out and spend. But those people can be more ruthlessly pragmatic. If they're in middle age — this is a one-time thing during a hard time — they may set it aside for a rainy day.”
Maybe younger folks could have a good time with this, he suggested.
“I can imagine my 27-year-old son, with no other obligations — he'd spend the $600 differently than I would.”
If you have yet to decide how to use your windfall, Parkman suggests indulging in that classic economic fantasy, the rich uncle: “He says, 'I'm going to give you $1,000 a year forever,' ” Parkman says. “If you really need it, you spend a lot of it. If your uncle says, 'I'm going to give you $1,000 this year and never a penny after that,' then you say, 'This increases my wealth, so I better not spend it all now. I'm never going to see it again.' ”
Not a single splurge on electronics, nor a leather sofa, nor a dishwasher, nor a shopping spree arose during the Journal's inquiries.
Not that those purchases didn't cross anybody's mind.
“In an ordinary year, I probably would have gone out and gotten a flat screen TV, a new laptop, or some other high-tech gadget,” wrote Vilma Ruiz. “But I need to save that money. My stimulus check is going into my 'emergency fund.' ”
We did find a vacationer or two headed to the Flying Star on Rio Grande for breakfast.
Dana Giampaolo and Julie Nagle, of New Hampshire, had dropped some cash at Sadie's the previous night and had bought supplies for a camping trip to the Grand Canyon.
At least they spent that money here.
And for skeptics of the government stimulus plan, that may be as good as it gets.
“If you step back a second, and look at it from a macro-economic perspective, every dollar (the Feds are) giving you is a dollar they have to borrow,” Parkman said.
“I think it's a quick fix for a big problem,” said Elliot Eaves, a delivery man for Wildflower Wrangler florist on Rio Grande. “I think it's doing more damage than good.”
Charlotte Cooper initially said she planned to invest her money, although, “I'm not real confident about our economy.”
Her friend, Mary Jane Low just said she would invest.
“I think the stimulus checks are a terrible waste of money,” said Low, a psychotherapist. “I wish they had put the money toward welfare, local needs, extending unemployment checks. It's a terrible political thing.”
Cooper, a retired educational administrator, picked up the thread, “local needs, state, city, whatever. How do I count the ways?”
One e-mailer, who gave her name and contact information, but asked not to be identified, thinks she found a way to route her money to support her causes.
“My husband and I are going to send our stimulus checks to the Obama for President campaign,” she wrote.
This all assumes, of course, that we're actually going to do what we say we're going to do. And Parkman is skeptical about that, too.
“I don't put much faith in surveys,” he said. “You try to pin people down. Maybe they want to be politically correct. ... But when they get that check ... ?”
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