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EDITORIAL

How To Spend A Rebate Check

05/12/08

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” — Chinese proverb

The American consumer is getting a fish. Obviously, a real job would be better.

But spending $106 billion of taxpayer money to train Americans for 21st century jobs so they can compete in the global economy doesn’t promise much political bang for the buck. Nothing like sending big fat rebate checks to the mailboxes of 130 million U.S. households.

President Bush said in a recent radio address that the money will help offset high prices at the gas pump and the grocery store. And it will breathe a little life into the slow-moving economy.

This is called economic stimulus. It’s a gimmick, of course. Something for nothing. Claptrap. It’s borrowed money that the same consumer is responsible for repaying in full, plus interest — just like credit card debt.

The checks — or direct deposits — started going out at the end of last month and are scheduled to continue through the middle of July. They’ll range up to $600 per individual, $1,200 per couple and $300 per child.

The purpose, aside from appeasing the beleaguered consumer, is to mainline cash into the economy through retailers.

The retailers know an opportunity when they see it. Supermarkets, clothing stores, big box chains and electronic gadget outlets are all vying for the rebate money with special come-ons. Economists estimate that they will succeed in attracting more than $40 billion of the $106 billion in total rebate money.

The theory behind the rebates goes like this: if we borrow enough money and spend it lavishly, we will generate economic growth. The more consumers spend immediately — rather than save — the better the economic stimulus program will work. Just as the president encouraged Americans to go to the mall in the wake of 9/11, he’s now sending us the message that using the rebate check to buy a high-def TV is patriotic.

This is the virtue of thrift turned on its head. The Chinese — who write clever proverbs and make many of the high-def TVs — are no doubt snickering. Spending the rebate impulsively, even frivolously, may seem patriotic — not to mention fun — to some Americans. But it’s not in the interest of most, according to accountants, bankers and financial advisors. Many of them urge people to save it or pay down existing debt.

So what’s the right course: follow the president or the financial advisors? For the puzzled consumer who’s faced with surging food, fuel and medical costs, maybe the best solution is to choose from among a growing list of aggressive retail come-ons. Home Depot, Sears, Circuit City and Radio Shack, among many others, are running discounts and promotions.

But given that consumer price index for food rose 5 percent last year — the biggest spike in 17 years — ShopRite’s offer of a 10 percent bonus on $300 gift cards looks particularly appealing. It means consumers can buy $1.10 worth of food for the dollar they were going to have to spend anyway.

Since the rebate gives consumers a fish, and not a job, while they’re in the grocery, they might want to pick up a little basil. It goes well with halibut, mackerel, salmon and tuna.