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Utahns ready to spend, unsure about economic impact of Bush's rebate plan

Published January 19, 2008 12:00 am
This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Matt Webber is ready to do his part for the nation's economy.

A Utah family man, Webber maintains that if he gets a tax rebate as part of President Bush's proposed economic stimulus package, he'll more than likely do what the president wants: spend the windfall.



"I'd want to spend it on an Xbox, but my wife and I would probably end up spending it on things for our children, like clothes," he said.

Economists and consumers alike lauded the proposal, although many questioned the politics behind it.

"If people who pay taxes are the ones who actually get the money, instead of having an unrealistic ceiling that eliminates most of the middle income taxpayers [it will make a difference in the economy]," said Corrie Player, owner of a small geotechnical services company in Utah.

"Any money that goes into the economy to actual wage earners is a good thing," she added.

Yet some economists familiar with Utah's situation pointed out that the stimulus package may have less of an impact here because of the state's booming and prospering economy that may be strong enough to shrug off a national recession, defined as at least two consecutive quarters of decline in the gross domestic product.

"We're unlikely to slip into a recession anyway," said Jeff Thredgold, economic consultant to Zions Bank. "Where [the stimulus package] could really have an impact is in the Midwest and some of the industrial states" where the economy is weaker.

In his White House announcement, Bush said that the growth package must include incentives for business investment and quick tax relief for individuals. Congressional aides said the White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples.

"Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities," he said.

Some economists are suggesting, however, that the nation's economy already may be in a recession and that any stimulus package may only soften the edges and shorten its length.

One suggested that if the nation is indeed in a recession, Utah's economy could prove more vulnerable than many believe, and eventually may follow other states into declining growth.

"As the nation goes, Utah may go," said Tucker Hart Adams, an economic consultant in Denver who until last month served as regional economist for U.S. Bank. "Utah has survived much of the downturn in the housing industry but that may just mean that the fall will come just a little later on."

She suggested that if Utah indeed slips into a recession a little later than the rest of the country, the economic stimulus package, if approved by Congress, may come at an ideal time to benefit the state.

"It doesn't matter how perfect of a package that gets proposed, it inevitably is going to take a while to get through Congress," Adams said. "It could be as much as two years before the impact hits and that could be just in time to help Utah out."

To be effective, a stimulus package probably will have to be about the size that Bush is proposing, said Austin Sargent, an economist with the Utah Department of Workforce Services.

"Still, [Congress and the president] really will only be playing on the margins of a $12 trillion to $13 trillion economy, so there isn't a lot that can be done other than maybe softening any downturn that might occur," he said.

For Utahns Michael and Karen Harris, the recession may already have started.

Harris lost his job earlier this week as an information technology director at a local company. While he looks forward to the possibility of receiving a tax rebate, he doubts it will be large enough to offset his personal financial struggle or to provide any significant economic stimulus for the country's economy.

"I always think it's a good idea for people to get some of their money back," he said. "Unfortunately, I don't think it will be enough to make a difference. It's a few bucks and I think that a lot of people may end up saving it for when things get worse."

Moab resident Sarah Melnicoff called the economic stimulus plan "artificial."

"They're trying to stimulate the economy by giving money to people with the assumption they'll spend it immediately. That's so artificial," Melnicoff said. "It's like giving a steroid shot to someone with a broken leg. That's not going to do anything to help."

Doug Ward, 61, of Moab, said he already has felt the effects of the economic squeeze and so have his children. He said his daughter lives in California and cannot sell her condominium. To move it, she would have to cut the price significantly because of the slump in the housing market, he said.

Ward said he would welcome a tax rebate and would, most likely, spend the money right away. "I wouldn't put it in savings. I'd use it to pay some bills that really need to be paid."

---

* Tribune correspondent LISA CHURCH in Moab and THE ASSOCIATED PRESS contributed to this report.

What would you do with $800?

Buy stuff

Upside Consumer spending drives the economy, whether it's paying for a new flat-screen TV or a vacation.

Downside A short-term spurt in consumer spending doesn't address long-term economic problems.

Pay bills

Upside This would be a huge help to those Americans struggling to pay credit card debt or mortgage payments.

Downside But it wouldn't stimulate the economy, other than to make banks and mortgage lenders happy.

Put in savings

Upside Anything that encourages Americans to boost their anemic savings rate is a good thing.

Downside Again, this would not encourage the production of goods or create any jobs.

Source: The Salt Lake Tribune

How was the proposal received? Democratic congressional leaders agree tax relief should be in the package, but they are working on a broader measure.

What's next? The president and Congress hope to pass legislation within a month.

 

 

 

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