Don't Take That Rebate Check to Wal-Mart

4 Better Things To Do With Your Windfall

Wal-Mart is waiting for your check.

The world's largest retailer, which made $819,976 in sales every minute during the fourth quarter of its 2007 fiscal year, is expecting to see you walk through its doors with an IRS rebate check in your hands. But there is a more patriotic thing you can do.

Beginning this May, the U.S. Treasury will start sending "economic stimulus payments" to more than 130 million Americans. The vast majority of individuals who qualify for a stimulus payment will not have to do anything other than file their 2007 individual income tax return to receive their rebate. In most cases, the payment will equal the amount of tax liability on the return up to a maximum amount of $600 for individuals ($1,200 on a joint return) and a minimum of $300 for individuals ($600 on a joint return). The government made the same deal with taxpayers back in 2001, when the Treasury sent "advanced payment" checks of $300 to single tax filers and $600 for joint filers.

When you spend your rebate check at America's signature retailer, you are responding to the government's stimulus like a true patriot. In a speech five days before Christmas of 2006, President George W. Bush said, "A recent report on retail sales shows a strong beginning to the holiday shopping season across the country -- and I encourage you all to go shopping more."

The White House/Congressional economic stimulus package should be labeled for what it is: the Wal-Mart/Beijing Welfare Subsidy of 2008. The "stimulus" plan is an income transfer program from the U.S. Treasury, to Wal-Mart, and from there to its chief trading partner, China.

Wal-Mart issued a press release shortly after the tax rebate passed applauding "the President and Congress for recognizing the economic struggles of everyday Americans and moving quickly to provide much needed tax relief." But the real relief is going to Wal-Mart.

Here's how it's supposed to work: The American taxpayer takes this windfall of discretionary income, drives to Wal-Mart, and buys another MP3 player made in China. Much of the Treasury's investment passes to the Walton family, and to their sweatshop vendors in Guangdong Province.

In an interview with Reuter's, Wal-Mart acknowledged that the tax rebate will trigger a "rapid response" at their check out line. "I would like to think that, as in the past, we have gotten at or more than our fair share of our checks," Wal-Mart's Chief Financial Officer Thomas Schoewe told Reuters. This Treasury infusion is a downpayment on Wal-Mart's estimated $9 billion worth of direct imports from China this year, not counting its indirect imports. The American consumer is just a pass-through.

One of the groups that lobbied the hardest for this "stimulus," the National Retail Federation, estimated that 41% of the checks being mailed this May will be spent. This cash injection is supposed to jump-start the economy. But when spent at stores like Wal-Mart or Home Depot, it won't create more jobs, or higher wages, or even more American production. It will simply rise to the top management, or be exported overseas, where inventory procurement occurs.

A 2005 study by the Economic Policy Institute, U.S.-China Trade, 1989-2003, found that America's growing trade deficit with China has had an increasingly negative impact on the U.S. economy, triggering job losses in the manufacturing sector in every state in the nation. The EPI study found that 1.5 million jobs were lost to lower-wage Chinese competition in the 14-year period between 1989 and 2003. During this period, the U.S. trade deficit exploded twenty-fold, like Chinese fireworks, from $6.2 billion to $124 billion. In the month of January 2007, the U.S. trade deficit with China stood at -$21.27 billion, or -$255 billion annualized.

The EPI study noted that the pace of job loss has more than doubled since China entered the World Trade Organization (WTO) in 2001. China's exports to America of sophisticated electronics and communications equipment requiring skilled labor are growing much more quickly than its exports of low-value, labor-intensive products. "Everyone knew we would lose jobs in labor-intensive industries like textiles and apparel," one EPI researcher said, "but we thought we could hold our own in the capital-intensive, high-tech arena. The numbers we're seeing now put the lie to that hope -- as China expands its share even in core industries such as autos and aerospace."

"Right now," says Mike Duke, Vice Chairman of Wal-Mart's International Division, "in many markets of the world, particularly mature markets, the consumer is under a lot of pressure. We are perfectly positioned for this time."

But what if Americans don't take their Treasury check to Wal-Mart? Here are 4 better alternatives:

1. Put It Towards Your Credit Card Debt: According to the Federal Reserve's most recent Survey of Consumer Finances (SCF), about 76% of U.S. families carried some form of debt in 2004. The first thing Americans should do with their rebate is pay off their plastic debt. Outstanding debt on bank-type credit cards rose from $181 billion in 1991, to $645 billion in 2004. This debt is a drag on our economy, and every patriotic American family should first strive to wipe out its own red ink.

2. Save it: A survey conducted at the University of Michigan, found that only 22% of households in 2001 said they would spend their Treasury rebate. Other consumers said they would either save the money or use it to pay off debt. Personal saving jumped in 2001 by precisely the amount suggested by the survey results. The Michigan study said that since they were mainly saved, the 2001 advanced payments provided little stimulus to the economy. The personal savings rate in America hovered just around 0% in 2007---the lowest level in the last twenty years. According to the University of Michigan report, "Direct evidence on consumption and investment spending in response to the (2001) tax changes suggests that these policies provided only modest stimulus."

3. Spend it locally: Money spent on local merchants recycles 7 or 8 times more productively than money spent at national chains. Your dollar recirculates only if its stays local. When it gets wired overnight to corporate headquarters, it has been extracted from the local economy as if it had been strip-mined.

4. Donate it to a local charity: You can help needy people in your hometown, and claim your donation as an itemized deduction to lower your taxable income to the IRS. This is at least a more honestly-earned tax break, instead of the retailer-inspired plan developed by the White House and Congress.

President Bush wants you to "go shopping more," and Wal-Mart has more than 4,000 U.S. locations to take your check. But it would be more patriotic to reduce your own personal debt, or boost your own personal savings, rather than let a multi-national corporation spend it for you in China.

Al Norman is the founder of Sprawl-Busters, and the author of "Slam Dunking Wal-Mart."

Comments

[retarius]

This whole stimulus package is a total crock. The government is running a deficit, so to give every taxpayer a rebate of $300 or more, it has to BORROW the money. Where will it BORROW this money from? Well from our friends in Asia, that's who from. Eventually, the BORROWED money will have to be paid back, with INTEREST, by your CHILDREN, since it has become part of the NATIONAL DEBT.

So go and spend the money in Walmart and give the money back to CHINA where it came from.

Has anyone heard of an economic plan so ludicrously stupid that when you are deep in DEBT, that your advice is BORROW some more money and go to the MALL! It is insane.

As a regular person, if you are borrowing money to buy food, you could kind of guess that you had a problem. If you are borrowing money for a house or some durable appliance that will improve your life over a number of years then that might be a sensible thing to do.

Applying this logic to the government, if they were to pump $150 billion into the country's infrastructure, building hospitals, airports, roads, subways etc, then they would stimulate the economy by paying wages to people that would spend it and the money would recirculate plus everybody would enjoy the benefits of the improved infrastructure for many many years....b­ut giving money to people to go and buy cheap tee shirts from China at the local Walmart is sheer lunacy....­are all American leaders, citizens and economists really as totally stupid as the rest of the world thinks they are?

Here's an even better idea, how about spending the $150 billion on an education system that taught people to think critically for themselves?

[PacificGatePost]

Al,

The sentimentality underlying the article is widely felt.

Pack that pillow case with the checks if you can.

http://pacificgatepost.blogspot.com/2008/02/rebounding-us-economy.html

A broadly based change of attitude is in order - top to bottom... make that bottom to top.

[darker]

Oh that Bush-Cheney rebate check. You can wipe your arse with it. They made sure the
dollar will be worthless by the time they leave Washington DC. And they won't go to jail
for all of their crimes. That's "America". It stinks.

[ronbow50]

Have you ever played the game of Monopoly? I have noticed that there is a pattern and a rhythm to the game that seldom changes: Toward the end there would be one person who had virtually all of the properties and money. The losing players, realizing there was no longer any way to make a comeback, would admit defeat and call for the reshuffling of cards and a new beginning. It was THEN a predictable thing would happen. The big winner would start offering to loan money to everyone FOR FREE to keep the game going because he was having so much fun even though everyone else was bored and no longer wished to participate.

Am I the only one who has the feeling that the anticipated $600 rebates are really just a guise to continue an extremely lengthy Monopoly game in which our ultimate humiliation has been preordained.

God knows the working, or so-called “middle” class, has striven mightily over the years to stay in the game. The evolution of methods that have been used have used include:
1. In the fifties more and more mothers began to go into the work force after their children were in school.
2. In the 1970’s we began to see the “working mother” of school-age children enter the work force as parents became unavailable for daytime school functions while day care became a huge priority.
3. From the 1980’s on the American people became the hardest working people in the civilized world, working longer hours more productively than any other industrialized country. 4. In the 90’s, continuing the pretense of “making it” required a an infusion of cash, and the equity in our homes as well as the cahing in of retirement assets were just the ticket to provide breathing room. The downside was that behind the facade of continued consumption the average person’s debt to asset ratioo became distorted far beyond what could have been concieved of only a decade earlier.
5. In the same vein, the American people emulated their government and began to finance monthly expenses with credit cards.

According to the economist Robert Reich every method used has, in the long run, merely been stopgaps in an inevitable death spiral because we are ignoring the elephant in the room, the fact that the American working man and woman has not had a raise in thirty years. Even though their productivity has continued to increase for the entire time span they have benefitted little from their hard work. In the last seven year alone their buying power has decreased a thousand dollars while while those at the top have pocketed the entire gain in GDP.

One would have to wonder what the situation would be if, instead of lavishing tax breaks on the top 5%, the majority of the cuts had been instituted on payrolls for the last seven, or even the last thirty years. In other words, what if we had rewarded labor rather than capital for that period of time? As just an example, suppose “Joe Lunchbucket” had been allowed to write off his mileage to work while “Mr. Born in the End Zone who Believes he has Scored a Touchdown” had not received a full deduction for his corporate jet? Suppose we had not allowed the table to be tilted more and more to those President Bush refers to as “The haves, and the have-mores”? We will never know, because instead of real working class tax cuts we have gone with Rube Goldberg rebate schemes to try to create demand that should have already been in place.

Pat Buchanon in his recent column “Tapped Out Nation” describes the situation this way:

“Now, with the middle class tapped out, the home equity used up or declining, and mortgage, auto and credit card debt turning rotten, the U.S. government is going abroad to borrow 1% of GDP to hand out checks in May to get consumers buying again to prevent a recession. What kind of long term solution is this?”

Well, it isn’t a solution. It is a transparent attempt to put off an economic debacle until the next election. The American workers, who have had it stuck to them for the last seven years, are being asked to shut up and show their gratitude. We are all expected to ignore the dead elephant and continue to play a game we cannot, in the long run, hope to win. I, for one, believe it is high time to institute real changes in the tax code that would benefit those who work for a living. Now that would be REAL change that just might make a difference. I am not holding my breath in anticipation of this happening, but until it does, In words that paraphrase the great economic philosopher Johnny Paycheck, “Take this rebate and Shove it”.

[Rockyman]

An excellent reply Ron! We have gone from a one-earner family to two and then pulled out equity from our over-appreciated homes, then used even credit cards for everyday purchases. Now as a country we are willing to sell assets to keep "in the chips". We are trending in a very bad way!

[benjaminblue]

Another alternative is to use the check to buy a wedding present for Jenna Bush. She and her extended family haven't yet received their full direct and indirect due through Halliburton, The Carlyle Group and the unaccounted-for billions supposedly spent on Mr. Bush's vanity war.

[olephart]

The last time we were stimulated, the monies were an advance against any refund that we were entitled to for that tax year. I just put mine in the bank. I really haven't paid that much attention to the details of this "we've got to do something to keep our phony baloney jobs stimulus plan". I believe it's just a giveaway scheme to get past the elections. I haven't heard whether or not it will be counted as earned income with tax liabilities. Normally I'd just put it in the bank but this year I think that I'll either send it to my brokerage account and add it to my European Bond Fund or I'll buy some more gold. Dollars have lost their luster since they became worth 50 cents.

[msfiskvletterman]

3/2/08
2:03pm
Alexandria, VA

I was in Walmart last night with my food stamps card because their prices are lower on a number of grocery items. Most of us aren't buying MP3 players when we go shopping there.
Anyway, what's an MP3 player?

[marinade]

Social welfare pays into corporate welfare. Nice.

[mommadona]

Most people I've talked to are either going to put it in the bank for a rainy day, or pay off their bloated-interest credit card debt.

[marinade]

I'm going to buy some organically grown fruit trees.

[IntrepidReader]

I doubt if I'm the only one who believes that this time around, many of the rebate checks are going to go directly to credit card companies and banks, as financially stretched Americans desperately try to pay down their plastic and catch up on their mortgages. Or perhaps they'll go in the gas tank or towards the home heating bill--300.­00 would be a barely adequate down payment on a tank of heating oil for next winter ( this winter it wouldn't have even bought 100 gallons), though if prices keep gouging up, it may only suffice to buy a few tanks of gas for the car. The grocery stores might see a lot of these checks, too, what with food prices going up on a weekly basis.

As for those who won't immediately throw the checks into the bottomless pit of monthly payments, WalMart already noted that recipients of holiday gift cards weren't spending them on fripperies this year, they were being spent on groceries and household necessities. I don't expect to see anything different when these rebate checks show up in mailboxes. And while it may be progressive to slam WalMart, the fact is that more and more shoppers have no choice but to look for the cheapest prices, and all too often, that means heading for the big box store. I know I find most of my shopping is done at WalMart, Dollar General, Family Dollar, Food Lion (lower cost grocery chain in my area), Big Lots, Ross, and any other stores that sell for less. I can't afford to make political statements about where I buy my groceries, household goods and apparel these days.

[PepperzMom]

Wal-mart/any retail store...no­pe.

Pay off debt - yes.

Start spending again to get more debt...for me, NO, but sadly for others, the cycle will begin all over again.

[schmuckwithearlaps]

This whole article by Mr. "I hate Wal-Mart" is based on the assumption that the only thing people will buy in Wal-Mart with their government check is a music toy made in China. What about the fifty million people who will be buying food to put on their family's table? If only life were as simple as the author believes it is. "Wal-Mart=bad". Unfortunately, the world is a little more complicated. Limo liberals do not shop at Wal-Mart, so most writers on this site have never even been inside one. In many communities the shoppers are almost all low income people for whom a $3.88 tee shirt is important.
I know of one Wal-Mart in Los Angeles where the shoppers are almost exclusively recent immigrants from Mexico and central America who are trying to stretch their dollar every way they can. Sure, give the government money to your local charity, says the author, or save it. This is not an option for many people. Unfortunately, for many liberals, poverty is an abstract concept, and it is easy to imagine all those MP3 players feeding the Chinese enonomy. If only life were so simple, and if Wal-Mart disappeared off the face of the earth we could all live happily ever after.

[Necron99]

That's a great analysis of the trees. Here...loo­k...a forest.

[speakeasy]

Wow, what a totally missed point ignorant answer. It would seem to me that the limo libs are the ones leading the charge to raise wages and bring lost manufacturing jobs back to the US. It's a vicious circle created when the very same business that saves you money is, at the same time, taking away good paying jobs to skirt labor and environemental regs. WalMart has perverted its original business plan and Sam Walton would be ashamed, as should anyone who invests in this corrupt, unpatritic company. You're just another greedy prick who tries to act like you're looking out for the little guy.