August 14, 2008
Retailers Brace for Business Post Rebates
The U.S. Treasury Secretary Henry Paulson took exception this past Sunday when Tom Brokaw, host of NBC’s Meet the Press, said, “The tax rebates that were sent out earlier this year had about as much effect as a BB gun on a bear.”
While there is little argument that some retailers benefited from the government’s economic stimulus program, the fact remains that most of the dollars that found there way back to consumers in the form of rebates have either been spent or saved.
A number of retailers, according to a Wall Street Journal article, expect same-store sales numbers “to begin decelerating.” Some point to slower sales in the second half of July at chains, including Family Dollar and J.C. Penney, as a sign that the stimulus check engine is running out of steam.
Discussion Questions: What impact do you think the government’s stimulus check program had on the economy and retailing? Should the retail industry be lobbying the government for more action to address the current problems in the economy? What action, if any, do you think the U.S. government should be taking?
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As I see it, the rebate checks were intended to prevent a catastrophic collapse of the money supply as in 1929. But if that was achieved, that alone doesn’t mean there is no recession. And I didn’t think there was such a claim.
So the newscaster’s statement was essentially beating a straw man. The underlying causes are still with us, and yes, $4 gas has made that worse. To actually cure this situation would require making real changes, like:
1) Winding down the war, which has been kept off budget and financed on credit. For the first time since 1789, the US went to war without requiring the rich to kick in more. We can only be glad that it took so long for the inevitable inflation to arrive, but now it’s here.
2) Reducing our dependence on oil to get to work, instead of complaining, witch hunting, or looking for a way to subsidize gas.
3) Re-regulating now that we can all see that deregulation of the mortgage market and of oil futures were ideology driven failures comparable to the failures which collapsed the Soviet Union.
4) Stopping the war on the middle class, because we have a consumer-driven economy, and stopping the drift toward globalism, which has turned out to be a race to drive the average citizen’s disposable income down to third world levels.
Why are people surprised that the stimulus checks had a quick short-term impact? How far does $600 or $1200 go? So now we have more debt and the stimulus is over. Next????
Others have addressed the first question accurately, and the industry should be lobbying the government about the answer to the third, which is based on a return to sound fiscal planning. The federal, state and local governments have been on a mind-boggling spending spree since the beginning of the decade. The federal government has doubled its budget to more than $3.2 trillion. Collectively, the states are closing in on $2 trillion in expenditures, double what it was 10 years ago. This has to stop. One answer is to take a one-year hiatus for all expenses. Simply leave every line in every budget at every level of government the same as last year. No COLAs, no salary increases, no pension increases, nothing. We need to restore fiscal discipline somehow, and this is a good way to start.
Most performance indicators revealed that rebate checks did help briefly stimulate retail sales but high gas prices and high grocery prices have had a watering-down effect.
It is depressing that a lot of people go to work every day and are further behind in bills and finances than they were when the day began. The stimulus checks, for some of us, were either spent to pay down debt or pay for car bills, home repairs, etc. Some people may have benefited from the stimulus checks, but others just prolonged the agony of $4 a gal gas and higher heating/cooling costs for our homes, high health care costs with bad coverage, rising college costs, higher grocery costs, etc. Business post-stimulus for many is still business as usual – trying to stay afloat.
I would like to see the complete “tab” for the rebate program. In addition to the actual rebate dollars, how much did it cost the taxpayers to pass the legislation and prepare the checks?
As I see it, the two real problems with the economy are sub-prime loans and fuel prices. The rebate checks didn’t have an impact here!
There are many bankers who accepted unrealistic risk in offering home mortgages in a way that the banking world has never seen before. What penalty do these leaders pay? Why should the taxpayers have to bail them out? How about some jail time?
We would all like to see fuel at $2.00 per gallon, which is probably unrealistic. Get gasoline and diesel in the $3.00 per gallon range and you will see a whole shift (positive) in our economy. Consumers will feel better about the future and will have more discretionary dollars to spend every week, not just one time! Retailers and restaurateurs will see a dramatic improvement.
What has our government done (and what do they plan to do) to fix this? Write your congressmen and senators and get them working on fixing this rather than letting them sit and worry about whether or not they might become a vice presidential candidate!
Wow! Guns, bears, government waste…now this is a discussion I can sink my teeth into! And yes, the tax rebate was a PR move–perhaps well-timed–that resulted in not much more than more government waste.
Unfortunately, about the only thing that seems to return the government’s attention to maintaining our economic house is when the people’s attention returns to it. And we don’t pay attention unless we are hurting, really hurting. Maybe we have finally turned that leaf in energy policy. We have gotten bruised on credit policy, but history says we won’t remember that lesson for very long. And as for our economic/energy independence, we need only listen to the message “the bear” is sending in Georgia to be clearly reminded that he who has access to oil and gas NOW makes the rules–for now.
Did retailers benefit from the rebate checks. Sure. They obviously didn’t go into savings, so folks spent them on something. Even if it was just to buy the same goods and services at June’s prices that they bought in March.
Most stimulus checks were used to pay debt, fill the tank and put food on the table. These were not “discretionary” purchases per se. Did they think that consumers wouldn’t care about the wolf at the door–and instead, go to the Mall?
I am happy consumers got a bit extra to help with the household expenses. But this program couldn’t be taken as a serious attempt to revitalize the go-go years. The problems are macro, and the answers need to be macro.
Hmm, let’s think about 2008 so far….
No tax refund due to AMT, did not qualify for stimulus check, paid $4 gas for 4 cars to help the college kids get to work, and just paid higher college tuition bills for 2, while home value in Michigan dropped about $100k in last year or so…frankly, we are thinking twice about eating!!! Shopping isn’t off the radar screen these days, because I’m in the business, but buying stuff is a different story.
More like a BB gun and a bear. The government should quit wasting money and worry about things like trade imbalance, reducing the debt, increasing jobs, making American products more competitive in a global market, etc. Oh, sorry, I must have drifted off and been dreaming for a moment.
I think the stimulus checks were a waste of time. A few hundred dollars per household isn’t going to make a difference to anyone or the economy. Higher income households were completely discriminated against and got nothing at all. A nice percentage tax cut across the board for everyone would be better.
At this point, about three months after the first rebate checks hit consumers’ mailboxes, it seems apparent from most general retailers’ comp sales that there has been little impact. Of course, it’s possible that the numbers would have been worse without the rebates but it’s hard to tell.
Surely when this program was developed almost six months ago, nobody understood the impact that $4 gas and other escalating prices would have on consumer spending this summer. It’s likely that most of the rebate checks were needed to offset higher costs of living, eating and driving instead of a sudden decision to splurge.
Tom is right in my opinion. The tax checks had a very minimal impact and for a very small timeframe. As far as what can be done that will have long term impacts to stimulate the economy, well just ask the US consumer what their biggest fears are. Health care costs have skyrocketed and continue to worsen for the majority of US consumers. Energy costs have escalated to a point where some consumers and families have to budget cut their food and basic needs to pay for gas to go to work while Exxon and other big oil companies record quarter after quarter of record profits.
We need to tighten up our foreign spending, and address disparities between import and export of goods. I am all for helping poor nations, but the amount of support in food and protection that we provide to the world is far in excess to what we receive back from those that we help. US tax dollars need to be targeted to help our economic issues first, before we spend billions of US tax dollars helping others.
Putting money in consumers’ hands, especially those consumers who are disproportionately feeling the effects of economic malaise, is of course good for retailers. Unfortunately, it doesn’t really present anything other than a very short-term band-aid without any lasting effects.
While Walmart’s quarterly numbers announced this morning (net +17%) were the exception, what will help retailers–and we see this with Macy’s news yesterday about investing in customer insights–is focusing on their customers and giving them a qualified reason to visit the store.
Economic cycles will always exist, some worse than others. The good merchants will always survive and be stronger, just like pruning a branch from a tree helps the tree survive in the long-term, albeit with some short term pain.
I’m afraid the BBs and Bears analogy is all too apt. Even if half the stimulus checks went to old bills and half actually went to new spending, that was barely enough to move the needle. The stronger sales at low-price retailers reflect not just the impact of the $600 checks, but also the spending shifts caused by wide-scale trading down by consumers, who collectively are smart enough to postpone luxuries and find ways to stretch their weakening dollars. Call it “flight to value” – Americans are still spending, but much more carefully.
What actions should the government take? I believe our leaders must first define a vision, not lead with tactical fixes. If I were king, I’d begin with an energy “moon race” that will transform our electric power and transportation technologies and infrastructure. There’s plenty of private capital and ingenuity waiting for the right tax incentives and clear leadership. Begin with a solar rooftop initiative targeting businesses and institutions that already own flat-roof buildings. Define a plan for distributed power generation. Support this by requiring electric utilities to invest in advanced power transport, power storage and grid management capabilities and discouraging new capital-intensive centralized power plants.
Our road transportation system must be similarly guided toward electric and hydrogen fuel-cell vehicles that emit no carbon emissions. That means more than new cars. It also means defining new infrastructure, eventually replacing the 450,000 gasoline filling stations that dot our landscape with electron and H2 sources. This requires a 20-year plan, in my opinion, because it’s not just a few new cars, it’s a system upgrade for the nation.
These approaches would yield lasting economic and geopolitical benefits to the U.S. and its citizens. In the first place, it would create significant growth industries, exports and high-paying jobs in new energy technology, not to mention the engineering and construction fields. By defining a clear path that is not subject to short-term market fluctuations, it would make entrenched firms (like oil and car companies) more likely to adopt long term plans for their own transformation – releasing their capital to add to the virtuous cycle.
Over the longer time scale, it would begin to slow our actual dependence on oil. It would put the global community on notice that we are committed to yanking the petro-needles from our collective arms, and consequently reduce our incentive to meddle in the affairs of oil producing countries. This would ultimately begin to change our image in the world, and leave us less resented and ultimately more secure.
Once a BB was shot in the arse of a lazy bear,
To make it dance and appear like a bull in air.
The bear did jumped up a bit, then yawned and sat,
While Henry Paulson exclaimed, “That fixes that.”
Next came a report saying jobs and sales were down,
And Congress and the White House responded in a frown.
Now Washington’s oracles feigning any long term focus,
Are considering more giveaways for the next hokey pocus.
The tax breaks did what they were supposed to do. They gave retailers one more month before they have to face the reality of a new economy. Welcome to the “need” economy, because the “want” economy has been a house of cards for a long time. The “want” economy has been based on financial shell games since 2001. When our lawmakers embrace the importance of domestic manufacturing, and start to put the financial service industry in proper perspective, we can start to adjust to the new economy. We’re already seeing discount stores get the benefit. I think the back to school season will be a huge test of what consumers want vs. what they need. Let’s check this patient in a few weeks.
Whatever positive impact they had was short-lived, and ran right into the headwind of $4.00 gas prices. With gas prices now starting to come back down, that’s likely to have a greater impact on consumer spending than the tax rebates.
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As I see it, the rebate checks were intended to prevent a catastrophic collapse of the money supply as in 1929. But if that was achieved, that alone doesn’t mean there is no recession. And I didn’t think there was such a claim.
So the newscaster’s statement was essentially beating a straw man. The underlying causes are still with us, and yes, $4 gas has made that worse. To actually cure this situation would require making real changes, like:
1) Winding down the war, which has been kept off budget and financed on credit. For the first time since 1789, the US went to war without requiring the rich to kick in more. We can only be glad that it took so long for the inevitable inflation to arrive, but now it’s here.
2) Reducing our dependence on oil to get to work, instead of complaining, witch hunting, or looking for a way to subsidize gas.
3) Re-regulating now that we can all see that deregulation of the mortgage market and of oil futures were ideology driven failures comparable to the failures which collapsed the Soviet Union.
4) Stopping the war on the middle class, because we have a consumer-driven economy, and stopping the drift toward globalism, which has turned out to be a race to drive the average citizen’s disposable income down to third world levels.
Why are people surprised that the stimulus checks had a quick short-term impact? How far does $600 or $1200 go? So now we have more debt and the stimulus is over. Next????
Others have addressed the first question accurately, and the industry should be lobbying the government about the answer to the third, which is based on a return to sound fiscal planning. The federal, state and local governments have been on a mind-boggling spending spree since the beginning of the decade. The federal government has doubled its budget to more than $3.2 trillion. Collectively, the states are closing in on $2 trillion in expenditures, double what it was 10 years ago. This has to stop. One answer is to take a one-year hiatus for all expenses. Simply leave every line in every budget at every level of government the same as last year. No COLAs, no salary increases, no pension increases, nothing. We need to restore fiscal discipline somehow, and this is a good way to start.
Most performance indicators revealed that rebate checks did help briefly stimulate retail sales but high gas prices and high grocery prices have had a watering-down effect.
It is depressing that a lot of people go to work every day and are further behind in bills and finances than they were when the day began. The stimulus checks, for some of us, were either spent to pay down debt or pay for car bills, home repairs, etc. Some people may have benefited from the stimulus checks, but others just prolonged the agony of $4 a gal gas and higher heating/cooling costs for our homes, high health care costs with bad coverage, rising college costs, higher grocery costs, etc. Business post-stimulus for many is still business as usual – trying to stay afloat.
I would like to see the complete “tab” for the rebate program. In addition to the actual rebate dollars, how much did it cost the taxpayers to pass the legislation and prepare the checks?
As I see it, the two real problems with the economy are sub-prime loans and fuel prices. The rebate checks didn’t have an impact here!
There are many bankers who accepted unrealistic risk in offering home mortgages in a way that the banking world has never seen before. What penalty do these leaders pay? Why should the taxpayers have to bail them out? How about some jail time?
We would all like to see fuel at $2.00 per gallon, which is probably unrealistic. Get gasoline and diesel in the $3.00 per gallon range and you will see a whole shift (positive) in our economy. Consumers will feel better about the future and will have more discretionary dollars to spend every week, not just one time! Retailers and restaurateurs will see a dramatic improvement.
What has our government done (and what do they plan to do) to fix this? Write your congressmen and senators and get them working on fixing this rather than letting them sit and worry about whether or not they might become a vice presidential candidate!
Wow! Guns, bears, government waste…now this is a discussion I can sink my teeth into! And yes, the tax rebate was a PR move–perhaps well-timed–that resulted in not much more than more government waste.
Unfortunately, about the only thing that seems to return the government’s attention to maintaining our economic house is when the people’s attention returns to it. And we don’t pay attention unless we are hurting, really hurting. Maybe we have finally turned that leaf in energy policy. We have gotten bruised on credit policy, but history says we won’t remember that lesson for very long. And as for our economic/energy independence, we need only listen to the message “the bear” is sending in Georgia to be clearly reminded that he who has access to oil and gas NOW makes the rules–for now.
Did retailers benefit from the rebate checks. Sure. They obviously didn’t go into savings, so folks spent them on something. Even if it was just to buy the same goods and services at June’s prices that they bought in March.
Most stimulus checks were used to pay debt, fill the tank and put food on the table. These were not “discretionary” purchases per se. Did they think that consumers wouldn’t care about the wolf at the door–and instead, go to the Mall?
I am happy consumers got a bit extra to help with the household expenses. But this program couldn’t be taken as a serious attempt to revitalize the go-go years. The problems are macro, and the answers need to be macro.
Hmm, let’s think about 2008 so far….
No tax refund due to AMT, did not qualify for stimulus check, paid $4 gas for 4 cars to help the college kids get to work, and just paid higher college tuition bills for 2, while home value in Michigan dropped about $100k in last year or so…frankly, we are thinking twice about eating!!! Shopping isn’t off the radar screen these days, because I’m in the business, but buying stuff is a different story.
More like a BB gun and a bear. The government should quit wasting money and worry about things like trade imbalance, reducing the debt, increasing jobs, making American products more competitive in a global market, etc. Oh, sorry, I must have drifted off and been dreaming for a moment.
I think the stimulus checks were a waste of time. A few hundred dollars per household isn’t going to make a difference to anyone or the economy. Higher income households were completely discriminated against and got nothing at all. A nice percentage tax cut across the board for everyone would be better.
At this point, about three months after the first rebate checks hit consumers’ mailboxes, it seems apparent from most general retailers’ comp sales that there has been little impact. Of course, it’s possible that the numbers would have been worse without the rebates but it’s hard to tell.
Surely when this program was developed almost six months ago, nobody understood the impact that $4 gas and other escalating prices would have on consumer spending this summer. It’s likely that most of the rebate checks were needed to offset higher costs of living, eating and driving instead of a sudden decision to splurge.
Tom is right in my opinion. The tax checks had a very minimal impact and for a very small timeframe. As far as what can be done that will have long term impacts to stimulate the economy, well just ask the US consumer what their biggest fears are. Health care costs have skyrocketed and continue to worsen for the majority of US consumers. Energy costs have escalated to a point where some consumers and families have to budget cut their food and basic needs to pay for gas to go to work while Exxon and other big oil companies record quarter after quarter of record profits.
We need to tighten up our foreign spending, and address disparities between import and export of goods. I am all for helping poor nations, but the amount of support in food and protection that we provide to the world is far in excess to what we receive back from those that we help. US tax dollars need to be targeted to help our economic issues first, before we spend billions of US tax dollars helping others.
Putting money in consumers’ hands, especially those consumers who are disproportionately feeling the effects of economic malaise, is of course good for retailers. Unfortunately, it doesn’t really present anything other than a very short-term band-aid without any lasting effects.
While Walmart’s quarterly numbers announced this morning (net +17%) were the exception, what will help retailers–and we see this with Macy’s news yesterday about investing in customer insights–is focusing on their customers and giving them a qualified reason to visit the store.
Economic cycles will always exist, some worse than others. The good merchants will always survive and be stronger, just like pruning a branch from a tree helps the tree survive in the long-term, albeit with some short term pain.
I’m afraid the BBs and Bears analogy is all too apt. Even if half the stimulus checks went to old bills and half actually went to new spending, that was barely enough to move the needle. The stronger sales at low-price retailers reflect not just the impact of the $600 checks, but also the spending shifts caused by wide-scale trading down by consumers, who collectively are smart enough to postpone luxuries and find ways to stretch their weakening dollars. Call it “flight to value” – Americans are still spending, but much more carefully.
What actions should the government take? I believe our leaders must first define a vision, not lead with tactical fixes. If I were king, I’d begin with an energy “moon race” that will transform our electric power and transportation technologies and infrastructure. There’s plenty of private capital and ingenuity waiting for the right tax incentives and clear leadership. Begin with a solar rooftop initiative targeting businesses and institutions that already own flat-roof buildings. Define a plan for distributed power generation. Support this by requiring electric utilities to invest in advanced power transport, power storage and grid management capabilities and discouraging new capital-intensive centralized power plants.
Our road transportation system must be similarly guided toward electric and hydrogen fuel-cell vehicles that emit no carbon emissions. That means more than new cars. It also means defining new infrastructure, eventually replacing the 450,000 gasoline filling stations that dot our landscape with electron and H2 sources. This requires a 20-year plan, in my opinion, because it’s not just a few new cars, it’s a system upgrade for the nation.
These approaches would yield lasting economic and geopolitical benefits to the U.S. and its citizens. In the first place, it would create significant growth industries, exports and high-paying jobs in new energy technology, not to mention the engineering and construction fields. By defining a clear path that is not subject to short-term market fluctuations, it would make entrenched firms (like oil and car companies) more likely to adopt long term plans for their own transformation – releasing their capital to add to the virtuous cycle.
Over the longer time scale, it would begin to slow our actual dependence on oil. It would put the global community on notice that we are committed to yanking the petro-needles from our collective arms, and consequently reduce our incentive to meddle in the affairs of oil producing countries. This would ultimately begin to change our image in the world, and leave us less resented and ultimately more secure.
Once a BB was shot in the arse of a lazy bear,
To make it dance and appear like a bull in air.
The bear did jumped up a bit, then yawned and sat,
While Henry Paulson exclaimed, “That fixes that.”
Next came a report saying jobs and sales were down,
And Congress and the White House responded in a frown.
Now Washington’s oracles feigning any long term focus,
Are considering more giveaways for the next hokey pocus.
The tax breaks did what they were supposed to do. They gave retailers one more month before they have to face the reality of a new economy. Welcome to the “need” economy, because the “want” economy has been a house of cards for a long time. The “want” economy has been based on financial shell games since 2001. When our lawmakers embrace the importance of domestic manufacturing, and start to put the financial service industry in proper perspective, we can start to adjust to the new economy. We’re already seeing discount stores get the benefit. I think the back to school season will be a huge test of what consumers want vs. what they need. Let’s check this patient in a few weeks.
Whatever positive impact they had was short-lived, and ran right into the headwind of $4.00 gas prices. With gas prices now starting to come back down, that’s likely to have a greater impact on consumer spending than the tax rebates.