Tax rebate checks are swallowed by economic malaise

It is better than nothing.

That has been the subdued mantra repeated by working Americans in recent weeks as they spend the Bush administration’s final tax rebate in an economy racked by soaring gasoline costs, housing foreclosures, toppling banks and Wall Street jitters.

From Atlanta’s crowded housing projects to Indiana’s sprawling farm fields to San Gabriel’s bustling Chinatown, they spend because they have to -- a dispiriting indication of worry, not of consumer confidence.

Those who don’t sock their Treasury checks away deplete their modest windfalls on bargain-rate clothes, groceries, utility bills, mortgage payments and gas tanks that increasingly seem to verge on empty.

Atlanta resident Andrew Jenkins received his $600 government check last month, one among the tidal wave of rebates that went out to 130 million U.S. households in May and June.

The rebates, which provided up to $600 per taxpayer, $1,200 for couples and $300 per child younger than 16, are the centerpiece of a $168-billion economic stimulus package that President Bush signed in February -- an effort in line with the tax cuts his administration has tirelessly promoted over his eight years in office as the nation’s economy has stalled.

Jenkins, 32, cashed his check soon after it arrived and wasted no time doling it out on the essentials of his hardscrabble life. He spends most mornings slinging breakfast biscuits at a Mrs. Winner’s chicken restaurant in Chosewood Park, a neighborhood of projects and small frame houses a few miles south of Atlanta’s downtown.

Some of his rebate went to child support for one of his kids. Much of the rest went to two children from another relationship. They needed diapers, haircuts, clothes. What was left went to his mother, who was at wit’s end trying to pay her gas and electric bills.

“You feel like you’re taking care of things, and that feels all right,” Jenkins said. “But you wish you had something for yourself.”

On Wednesday, the Federal Reserve’s “beige book” of economic indicators from around the country portrayed consumer spending as “mixed, weak or slowing.” The report, which gleans anecdotal information eight times a year from businesses across the nation, added that retail sales were “subdued” in Atlanta and “grim” in Dallas. Amid falling sales for discretionary items, the lone upbeat note was an uptick in electronics purchases.

Automobile sales, usually a reliable marker of consumer readiness to spend and borrow, were “uniformly weak” in every part of the nation, the federal report said.

Adding to the gloom, the National Assn. of Realtors said Thursday that sales of previously owned homes fell in June to their lowest level of the last decade.

Even in an economy gripped by malaise, a small burst of spending is preferable to none, said Leonard E. Burman, a senior fellow at the centrist Tax Policy Center in Washington.

“What you want is to get people to spend,” he said. “In this economy, almost anything they spend their rebates on is helpful.”

For Steve Baker, 36, a propane gas service technician in the Indiana town of Warsaw, the $600 rebate was split between paying down his credit card bill and buying a weed-eater to contend with the lawn pests that afflict farmers and homeowners in his rural community.

“It was something I needed but I didn’t think I’d be able to get until much later,” he said.

The extra stipend came in handy but did nothing to ease Baker’s anxiety about the nation’s financial doldrums.

“It was like getting an end-of-the-year bonus at the beginning of summer,” he said. “It was nice, but it didn’t make me feel better about where the economy is going or where my financial picture is headed.”

That unsettled feeling is just as familiar to Stephanie Veronica, 24, a Chicago cocktail waitress.

“I don’t trust banks,” Veronica said, so she cashed her $300 check and promptly stored the money in an old-fashioned steel safe next to her bed.

The recent panicked runs on Countrywide and IndyMac banks only reinforced the cautionary tales Veronica has heard from her grandmother.

“She keeps talking about how bad the Depression was and how it’s happening all over again,” Veronica said. “I went to my bank and kept $500 in there. But the rest, the cash, I keep at home.”

Veronica said she felt secure in her job because “even when times are bad, people want to drink. So the tips are really good. I’m in the perfect business for how the economy is right now. But if I didn’t have this job? I don’t know how I’d feel. A lot of people are scared.”

Anthony Ng talked bitterly of his own apprehension as he smoked a cigarette outside the cellphone store he owns in the Chinatown section of San Gabriel. Ng’s rebate went right into his mortgage payment for the house he bought in 2005.

Next month, there will be no rebate check, and Ng sees no silver lining any time soon. Business has dropped 30% at his store since January, he said.

“People are watching what they spend because of gas prices and what the media says about a recession,” he said. “Half the people in this country don’t know what the word means, but they’re scared.”

Ng has tightened his belt just like his customers.

“No more vacation, no more eating out and no more speeding,” he said. “I’m always watching the speedometer now. For leisure, I do free things. I go to the park instead of to the movies or a restaurant.”

In Kirkwood, Mo., a suburb of St. Louis, Sara Kramer, 48, has already spent her $1,200 check. A single mother of two teenage sons, Kramer ticked off the necessities that whittled her rebate down to zero.

“I spent a good portion of it on clothes for the boys,” Kramer said. “A third of it went to bills, pay down the gas card for the car, pay down the utility and house bills. I didn’t save any of it. And by the time I was done, it didn’t help much anyway.”

Kramer, who works in sales for a kitchen and bath design company, was less than stimulated by her check.

“I’m scared,” she said. “Prices are going up. Everything’s so expensive. Everyone’s saying the same thing. I’ve listened to my neighbors and friends who got checks and everyone used the money to pay bills or at the grocery store. But it wasn’t a large enough sum to really make a difference. The clothes I bought? The boys have already almost grown out of them.”

Her boys have a summer business mowing lawns, making $80 to $120 a week. But with the price of gas skyrocketing for their power mowers, they too feel the economy’s squeeze -- a pinch that the rebate check did not ease.

“It was difficult for them to ask people for more money,” Kramer said. “I told them, ‘Honey, they get it. They understand.’ ”

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richard.fausset@latimes.com

p.j.huffstutter@latimes.com

steve.braun@latimes.com

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Fausset reported from Atlanta, Huffstutter from Chicago and Braun from Washington. Times staff writers Kate Linthicum, Miguel Bustillo, Erica Hayasaki and Stuart Glascock contributed to this report.