Already planning their spending

Times Staff Writers

If the money comes, they will spend it.

Most taxpayers in Southern California would be eligible for tax rebates under the economic stimulus plan drafted in Washington on Thursday. Many, it seems, would cash their checks and head to the mall.

“I’m not just going to go out and blow it, but it’s unexpected, and that’s a pretty good amount of money,” said Adam Finer, a 36-year-old lighting technician from Burbank. He and his wife, Mariella, a 24-year-old hotel front-desk clerk, might get a total of $1,200 from Uncle Sam.

If Congress passes the plan and President Bush signs it into law, what will they buy?


“We were just upstairs drooling over iPhones,” he said during a break from window-shopping at the Glendale Galleria. “This will make it easier to get one.”

For those unsure what to do with their windfalls, retailers would no doubt provide “a little nudge” with sales and special markdowns, said Scott Krugman, spokesman for the National Retail Federation, the industry’s largest trade group.

“There’s going to be a lot of competition for those dollars, so you’re going to see [stores] be aggressive,” Krugman said.

In the spring and summer of 2001, the last time the government handed out special tax rebates, Americans spent 20% of the money on retail purchases and another 20% on food or entertainment, and put the remaining 60% toward bills or debt reduction, said Britt Beemer, chairman of America’s Research Group, which polls thousands of consumers every week. (The group hasn’t yet conducted a survey on the 2008 economic stimulus package.)

That was enough to give sales numbers a bit of a kick in October 2001, said Jharonne Martis, senior research analyst with Thomson Financial.

“If past behavior is an indication of future behavior, then definitely, we could see a spike in consumer spending in the short term,” she said.

The one-time rebates made under the Economic Growth and Tax Relief Reconciliation Act of 2001 were for about $300 per individual and $600 per household -- not enough, Beemer said, to unleash a major spending spree.

“If they get $1,200, that’s going to be a different story,” he said. “Then you may see some real spending on something they would not otherwise have purchased.”

That would be the case for Lamar Clark, a single father of two from Moreno Valley in Riverside County who works as a psychiatric technician at Gateway Hospital. He might be eligible for $1,200 -- $600 plus $300 for each child, according to some calculations out of Washington -- and said he would no doubt use most of it to pay cellphone and car loan bills.

And maybe, Clark added, “I’ll buy myself some new shoes.”

The rebate checks seven years ago rolled out over a two-month period. If that were to happen this year, it could energize back-to-school shopping, which kicks into gear in July, Martis said.

The question is whether that would energize the broader economy or just amount to what economist Michael Niemira called a “temporary Band-Aid.”

“It may not have enough legs to keep the economy going,” said Niemira, chief economist for the International Council of Shopping Centers. “What it does do is buy time.”

Nathan Dyster, a 30-year-old lawyer from Glendale, said he didn’t think the stimulus plan would do even that.

“It’s a really bad idea,” said Dyster, who says he wouldn’t qualify for a rebate because he earns too much. “It reeks of last-minute desperation that they’re just willy-nilly giving people money back.”

Dyster is in the minority in California, where at least 63% of households would be eligible for rebates, according to Claritas, a San Diego-based demographic and marketing company. In Los Angeles County, at least 68% would qualify.

“That’s awesome!” said Amber Harrison, a 25-year-old waitress shopping Thursday at an Echo Park Walgreens drugstore. Harrison, who pays $375 a month to share a studio in Elysian Park, has been saving for several big-ticket items, including a car and her own apartment.

“Most people around me, even if they’re working, they’re really broke,” she said. “The extra money will be a blessing.”

Zachary Clardy, a construction superintendent working on the remodel of the J.C. Penney store at the Glendale Galleria, said he would use his rebate to pay down the balance on his Best Buy credit card first -- and then buy a flat-screen TV.

His buddy Tory Hathaway, also a construction superintendent on the same job, said the White House and Congress shouldn’t worry.

“It will definitely be spent,” said Hathaway, 38, who figured he would share the wealth with the Mexican economy and use his rebate to fly to Cabo San Lucas.


Times researcher Scott J. Wilson contributed to this report.