Tempting the masses

Christmas will come very early this year for more than 130 million Americans, who during the next month or so, will wake up to a $600 cheque in the mail courtesy of the US Government.

The cash bonus is the central plank in President George Bush's so called economic stimulus plan, a quick fix idea to beat the credit crunch, the housing crisis, the currency slump and gasoline price inflation all at once.

Who knew solving the world's biggest economic problems could be as easy as popping a cheque in your letterbox?

It is not. Because if the country's biggest retailers have their way, the 130 million or so bonuses will go to cover the partial cost of a single big ticket item like a new television, microwave or refrigerator.

Indeed, some of the biggest names on the American high Street are spending tens of millions of dollars on advertising campaigns to persuade the newly enriched potential customers to spend every penny in one blow out spree.

Wal-Mart, the world's biggest retailer, has done the most to attract as many cheques as it can. The company has offered to cash any stimulus cheque without charge, and to transfer the balance onto a prepaid Visa card to be used at the store or anywhere else on the High Street, again, at no extra charge.

Supervalu, grocery chain, is promoting a "watch your refund grow" programme, and Kroger, another supermarket operator, is offering stimulus gift cards.

Both are offering 10 per cent discounts on all stimulus cheque purchases.

Domino's Pizza is offering a "recession-busting" special of three pizzas for US$12 in a rebate promotion.

It is not surprising that only the cheaper end of the High Street is desperately trying to get stimulus cheques into the register. Richer Americans are not eligible for the payments.

The plan provides rebates of up to US$600 for individuals and up to US$1,200 for couples who file their taxes jointly, with additional payments to families of $300 per child.

Payments will be reduced for people with gross annual income above US$75,000 and for couples with incomes above US$150,000. Taxpayers whose incomes exceeded certain amounts are not eligible.

But there are concerns that those who qualify will either use the cheques to pay off debt, or simply to buy petrol.Such spending does not help the consumer economy.

And if, as many economists suspect, the bulk of the stimulus package is spent on gas, the main beneficiaries will in fact be the oil companies.

Fortunately, for the economists at least, there have been similar stimulus packages in the past, the effects of which we can study. Back in 2001 the government sent out US$300 cheques as the recession began to bite.

When asked how they would spend their cheques many consumers said they pay down debt or bills.

But, when they actually got the cash they spent more than a third of it on new clothes and another big chunk of it on treats like eating out.

So the one thing we know is that Americans love to shop. We can only hope they can do enough shopping to get the country back on an even economic keel.

James Doran is a New York based columnist and foreign correspondent for The Times of London.

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