There’s doubt about just how much the $168 billion economic stimulus package of tax breaks and rebates actually stimulated the economy. A new Harris Interactive poll released today compares what people said (when asked back in April) they would spend their stimulus checks on and what they claimed to have actually used it for when polled last month.
“While the government hoped that the checks would be spent to spur the economy, the reality was different,” according to the Harris report. The nationwide poll compared April and August responses and interviewed 2,710 U.S. adults. Nearly seven out of 10 (71 percent) said they had received a rebate check.
Of those, 36 percent report using the money to reduce non-mortgage, debt such as bills and credit card debt and 29 percent report they added to their cash savings.
More than a fifth (21 percent) say they spent the money on other things they wanted to buy and about one in 10 (11 percent) say they took leisure trips with the rebates. The other spending categories included home improvements (14 percent), restaurants and dining out (12 percent) and technology devices or entertainment events (5 percent).
“As predicted … much of the rebate money ended up deposited in savings or being mailed to credit card issuers. Retailers did try their best to get some of the rebate money, but that did not end up occurring as much as they, and probably the White House, wanted,” according to Harris. “What seemed like a great economic fix in the earlier part of the year, though, has not panned out, according to the results of the study.”
Note that some might argue that paying down credit card debt to a bank or lender, which then turns around and loans a portion of that money to other borrowers to buy goods, may also indirectly spur the economy.
Credit card delinquency rates down in Q2
The Harris poll results are bolstered by data released a day earlier by TransUnion.com, the national credit bureau that tracks credit spending and payment habits each quarter. During the second quarter of 2008 — when many people received stimulus checks and rebates — the delinquency rate on credit card accounts dipped by 12.6 percent from the first quarter of the year, to 1.04 percent.
“The lower delinquency statistics indicate that many consumers did in fact use their economic stimulus checks, in part, to pay down past-due credit card debt,” according to TransUnion’s Ezra Becker. “However, with most ‘big-box’ stores meeting or exceeding financial analyst expectations during the quarter, and considering the increase in credit card balance statistics over the quarter, it seems that a significant portion of those rebates did indeed find their way back into the economy.”
TransUnion’s TrueCredit.com poll in February found that 42 percent of respondents said they would pay down debt, 20 percent would save the money and 16 percent said they would buy something they consider necessary. Only five percent said they would splurge.
A CreditCards.com poll conducted March 7-9 by GfK Roper Public Affairs & Media found that nearly half of Americans planned to either pay debts (26 percent) or save the rebate (24 percent) rather than spend it.
According to reports, members of Congress this week are discussing the possibility of a second stimulus package with as much as $68 billion. Democratic presidential candidate Barack Obama has said he supports a “second stimulus package” of $30 billion to help “stabilize and strengthen the economy, provide aid to homeowners and states hardest-hit by the housing crisis, and extend and expand unemployment insurance.”
If approved, the question is how much of that stimulus money will spur the economy and how much will go toward making a dent in the nearly $1 trillion U.S. revolving credit card debt.
NOTE: This blog made it into the 31st Money Hacks carnival hosted by Moolanomy. The theme: economic crisis and bailout.
See related: Poll: Half of America won’t spend their ‘stimulus’ rebate, Credit card debt up, delinquencies down in Q2, report says, Tax rebate: Even those who saved ended up spending