NCPA - National Center for Policy Analysis


March 4, 2009

In an effort to bolster economic performance in light of a looming downturn in economic activity, President George W. Bush signed the on February 13, 2008.  More than two-thirds of the $152 billion bill consisted of economic stimulus payments that were sent beginning in May to approximately 130 million households.  How well did the program work, asks the National Bureau of Economic Research?

In their study, Matthew Shapiro and Joel Slemrod analyze evidence from a rider on the University of Michigan Survey Research Center's Monthly Survey, also known as the Survey of Consumers, which was included each month from February through June 2008.  The rider asked: "Thinking about your (family's) financial situation this year, will the tax rebate lead you mostly to increase spending, mostly to increase saving, or mostly to pay off debt?" 

  • Only one-fifth of the survey respondents said that the 2008 tax rebates would lead them to mostly increase spending.
  • Most respondents said they would either mostly save the rebate or mostly use it to pay off debt.
  • The most common plan for the rebate was debt repayment.

Even if only one-third of the rebates were spent, the aggregate amounts of the 2008 rebates were large enough that they would have had a noticeable effect on the timing of gross domestic product (GDP) and consumption growth in the second and third quarters of 2008.  Growth in the second quarter was stronger and growth in the third quarter was weaker than they would have been absent the rebate.

For this analysis, Shapiro and Slemrod aggregate the answers to five monthly surveys:

  • Of the 2,518 individuals asked the rebate question, only 61 respondents either answered that they did not know what they planned to do with the rebate or refused to answer, and another 212 respondents said they would not get the rebate.
  • Of those households receiving the rebate, almost 20 percent reported they would spend it; nearly 32 percent reported they would mostly save the rebate, and 48 percent reported they would mostly pay debt with the rebate.
  • Those over age 65 were more than 11 percentage points more likely to report mostly spending the rebate than those younger than 64.

Source: Donna Zerwitz, "Did the 2008 Tax Rebates Stimulate Spending?" NBER Digest, March 2009; based upon: Matthew D. Shapiro and Joel B. Slemrod, "Did the 2008 Tax Rebates Stimulate Spending?" National Bureau of Economic Research Working Paper No. 14753, February 2009.

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