How big a bounce from tax rebates?

The stimulus is likely to make economic growth 2 percentage points higher than it would otherwise have been in the second and third quarters, according to Macroeconomic Advisers, a St. Louis forecasting firm.

Other analysts say the effect will be smaller. In any case, the stimulus checks are no guarantee the United States will avoid a recession or a decline in gross domestic product. Despite some economists' views that the country already is in a recession, the nation's economy managed to grow -- albeit very slightly -- at a seasonally adjusted annual rate of 0.6% during the first quarter, the Commerce Department reported Wednesday.

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Recent surveys suggest that many Americans will use the money to pay off bills or increase savings. In a recent Associated Press-Ipsos poll, only 19% of respondents said they planned to spend their checks, while 45% said they will use the money to pay bills, and 32% planned to invest it.

A recent study of the rebates distributed during the 2001 recession showed that the impact of such payments can go on for several months. Economists Sumit Agarwal, Chunlin Liu and Nicholas Souleles wrote in the Journal of Political Economy that while Americans initially used some of the money to pay down debt, credit-card spending picked up in the nine months that followed.

This time, retailers are coming up with offers pegged to the rebates. Sears will give gift cards that add a 10% bonus to the value of the stimulus checks to customers who convert their checks to gift cards redeemable at any Sears, Kmart or Lands' End store.

Starting today, Kroger and SuperValu were also adding 10% to the face value of the checks if customers convert them into store gift cards, up to a $120 bonus per household. RadioShack will convert customers' rebate checks into prepaid MasterCards if they make a purchase.

They'll also get a 10% discount on purchases over $50.

Expedia has launched an online store, open through May 13, that encourages Americans to use their rebates for travel and includes a variety of packages in the $600 range. Some hotels, such as the Palms Casino Resort in Las Vegas, are offering discounts of up to 30%.

But the retailers' efforts might not be enough to boost consumers' moods. The Conference Board, a business research group in New York, on Tuesday said its index of consumer confidence dropped to 62.3 in April from a revised 65.9 in March, the lowest level in five years. The percentage of respondents intending to take a vacation in the next six months fell to a 30-year low.

Ted Schillinger, a 42-year-old freelance documentary filmmaker who lives in Brooklyn, says he and his wife will probably put their check into savings. "If in fact the economy is going into a downturn, this is an insurance policy," he said.

This article was reported and written by Kelly Evans and Sudeep Reddy for The Wall Street Journal.

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