BACK • 
"The Check Is in the Mail"
Yes, as of Friday, July 20th, the check is in the mail, and it's coming from the Internal Revenue Service by order of the President and Congress as part of the President's ten-year $1.35 trillion tax cut, passed by Congress last month and signed into law. I've spent some time in this column talking about the tax refund, and since it now is at hand, maybe a few more details are appropriate, as well as a view of the financial ramifications.
I'm sure by now you know the basic drill. Every American who filed a 2000 tax return is eligible. You don't have to do anything to get the rebate check-it will find you. Basically, the rebate is equal to about 5% of your taxable income for last year. Checks, for anywhere from $300 for individuals, to $500 for heads of household and $600 for married couples filing jointly, will be issued between now and September 21st. In total, the amount being sent is almost $39 billion. More on that in a moment. First, the statistics. Internal Revenue says it expects to mail about 91.6 million checks over the next couple of months. The first wave, already out the door, of about 8 million checks worth about $3. 4 billion, should have already reached some taxpayers.
The order as to who gets the checks first is based on the last two digits of your Social Security number. Thus, in the first issue, people whose last two digits are between 00-09 should have received their checks. On July 27th, those with Social Security numbers between 10-19 can start looking for their checks. August 3rd will bring checks for numbers between 20-29, August 10th for 30-39, August 17th for 40-49, August 24th for 50-59, August 31st for 60-69, September 7th for 70-79, September 14th for 80-89, and September 21st for those who last two digits fall between 90 and 99.
There you have it. That is the theoretical schedule for when you are supposed to receive your check. Over the next ten weeks, $38.8 billion, or roughly $3.8 billion a week, will be hitting the economy. This is not small stuff. Recall, please, that consumer spending accounts for two-thirds of the nation's Gross Domestic Product. Although the consumer has held up very well during this slow period of the past 8 or 9 months, this is designed to re-arm him.
I've read a lot of studies and have mentioned some previously in this space-most of the studies in this event assume that the average consumer will spend about one-third to one-half of their rebate, and save the rest. So much for studies! Studies, as usual, know nothing about human nature. In my opinion, the more likely scenario is that 90% of the people will spend about 90% of the money very quickly. Consider the time that the checks are being sent. There's still time for a summer vacation; maybe you haven't had one in a few years and this is your chance. Right around the corner, it's back-to-school, and that certainly may command the plans of many household budgets. If summer vacation and back-to-school doesn't get you, then there's always Christmas later in the year; between those three events, I think it is a very strong bet that most of the money will be spent, not saved. In fact, the more a person's budget needs a little extra cash, the more likely it is to be spent.
All this, of course, bodes well for the second half of the recovery theory that I continue to propound. The Fed has done its part. It's cut rates six times already, and apparently, if Mr. Greenspan's signals are being read correctly, the Fed is set to cut for a seventh time on August 21st. That, in and of itself, is powerful medicine for the economy. In our impatient world, people wonder why everything isn't all right already. They conveniently forget that actions by the Fed take 6-9 months to become visible in the economy. Since the Fed started cutting rates on the third of January of this year, only now will evidence of the cuts begin to show? So, with the Fed cuts plus the recent home refinancing (in part, bred by those Fed cuts) and the tax refunds, there is a lot of re-energizing happening in this economy. It will likely become clearer as we move deeper into the third quarter, and more so into the fourth.
In the meantime, watch the mail, there really is a check on the way-spend it in good health!
(Tom Butenhoff is a First Vice President with J. E. Liss and Company, Inc.
in Milwaukee. The views are his, and not necessarily those of Liss
Financial Services or the Job Connection/Hiring
Network.)