tax rebates

CBO on 2008 Tax Rebates Effectiveness

The Congressional Budget Office has released a brief, Did the 2008 Tax Rebates Stimulate Short-Term Growth?

What was the economic impact CBO predicted?

40% spent in first 6 months.

Raise Consumer Consumption by:

Q2    2.3%
Q3    1.0%
Q4   -1.0%

CBO says the results were:

Q2    2.3%
Q3    0.2%
Q4    1.0%

So, what's with the brief? Other economists are studying the effects of the 2001 and 2008 rebates and claiming they have negligable effect.

One of the 2008 tax rebates by Christian Broda and Jonathan Parker that used weekly data provided by participating consumers, who, in their homes, scanned the bar codes on their purchases, mainly from grocery stores, mass merchandise outlets, and drugstores. The researchers’ findings imply that about 19 percent of the tax rebates was spent in the second quarter of 2008 and that cumulative spending amounted to about 33 percent through the third quarter

A survey found that half used the rebate to pay off debt, one third saved the money and one third spent it.


By itself simple observation of aggregate consumption over time may not detect the effect of rebates

(in other words, if one does not examine the time line with enough granularity you might miss that blip on the screen!)

Gee wiz, even with the graph data does anyone believe that's a really effective tool to increase people's income in a recession? I guess I suffer from some hypothesis that people need permanent income.