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AP: Income, Spending Up Due To Rebates

From an outraged Associated Press:

After-tax incomes and spending show big gains

Tax rebate checks being printed at the Philadelphia Financial ...

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON – The millions of economic stimulus payments gave a massive jolt to household finances in May, sending after-tax incomes up by the largest amount in 33 years.

The payments helped boost consumer spending by the largest amount in six months.

The Commerce Department reported that disposable incomes, the amount left after paying taxes, surged by 5.7 percent last month. It was the biggest increase since May 1975, reflecting $48.1 billion in rebate payments made last month. The surge in incomes helped boost consumer spending by 0.8 percent, the biggest gain since last November.

The administration is hoping that the $106.7 billion in stimulus payments being made this year to 130 million households will be enough to offset serious drags on the economy at the moment from a prolonged housing slump, a severe credit crisis and soaring energy bills.

However, economists are worried that the boost from the stimulus checks will be only temporary and once the checks are spent, the risks of the economy falling into a deep recession will increase

The rebate checks are part of a $168 billion package of tax relief for individuals and businesses that Congress passed in February at the urging of the administration in an effort to give the economy a boost and ward off the threat of a deep recession. The payments began on April 28 and are scheduled to be completed by mid-July.

The Bush administration currently is resisting Democratic calls for a second stimulus package even though economists are worried that the effects of the boost will prove temporary at best. They fear the stimulus will fail to prevent a serious slump in the second half of this year as the economy’s troubles from housing, a severe credit sqeeze [sic] and soaring energy prices mount…

On the face of it this article appears to be surprisingly upbeat, especially coming from the professional doom-sayers of the Associated Press.

But when you unpack it the message is clear. All of these gains are simply due to the "rebate checks" and therefore are temporary at best.

Never mind that there have been several such stimulus packages over the last 33 years without any such dramatic up-ticks in income and spending.

Of course the real motivation for the piece is buried way down in the article:

The Bush administration currently is resisting Democratic calls for a second stimulus package even though economists are worried that the effects of the boost will prove temporary at best.

This entire story is simply a push for a second stimulus package, as now demanded by the AP’s masters.

But isn’t it funny that these selfsame Democrats will fight any permanent tax cuts with their dying breath?

Why is that?

This article was posted by Steve on Friday, June 27th, 2008. Comments are currently closed.

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