Inflation, food and gas bills eat up rebate check

Much of the economic stimulus is going toward essentials.

CHICAGO (AP) — Many Americans allowed themselves to fantasize about large-screen TVs, European vacations and other luxuries when they learned of the federal rebates they’d be getting this spring and early summer.

Or maybe — shh, don’t tell the president — they’d pay off a credit card or set the rebate aside for a big purchase in the future, notwithstanding Washington’s intentions that they pump it immediately into the flagging economy.

“It’s not often you get a windfall like that that you can just stash away for something you need later,” said Sara Jackson, 29, a graphic designer in Chattanooga, Tenn.

But reality has interfered, in the form of ever-climbing food bills and $4-a-gallon gasoline. Day-to-day living costs have sopped up the checks for many other early recipients and spoiled their rebate fantasies. Government figures released Friday showed consumer spending inched up just 0.2 percent in April, despite widespread anticipation of the stimulus payments sent out starting late in the month.

Based on a small but broadly diverse group of consumers who tracked their rebate spending in detail for The Associated Press, there was no mass rush to the malls for shopping sprees after the payments started showing up in bank accounts in significant numbers in May. The greater economic ramifications may not be seen for months.

Vanessa Church, a 49-year-old Chicagoan with six children, was grateful for the rebate but found there wasn’t much left over after big payments for utilities and other basic needs were taken care of.

Brandi Dobbins, 26, and her fianc each got their $600 checks just before their May wedding on the coast of Maine. The combined amount was spent almost instantly when their caterer called and, after asking ’Are you sitting down?’, informed her that due to food inflation, their bill for the wedding was jumping from $46.50 per guest to $59 — virtually the entire $1,200.

Derek Houck, an actor in North Hollywood, Calif., planned to allow himself an indulgence or two with whatever was left of his rebate after he’d taken care of necessities. It turned out to be more modest than he’d thought. When his personal finance software program showed him he had a whopping 50 cents left from the $600, he still celebrated by shelling out $49.95 for a new Wii game.

All told, 131 million households are to receive a total of $110 billion by the time the last payments are doled out in mid-July. The government hopes that what people do with them will help shape the direction of the sputtering economy.

Most individual taxpayers are getting checks of up to $600, while couples receive $1,200 plus $300 for each eligible child under 17. People earning too little to pay taxes but at least $3,000, including seniors whose only income is from Social Security, get $300 if single or $600 if a couple. And there are no payments for the wealthy: The amount starts to phase out for those with incomes over $75,000, or $150,000 for joint filers.

Based on economists’ preliminary assessments, and echoed by the AP sample group of more than two dozen people, Americans are not hesitating to spend the money — but more for essentials than was anticipated.

Some economists are now saying we will avert a recession, or at least a severe downturn. Don’t tell that to people who have seen their living standards squeezed by the markups in supermarkets and at the pump — like Church, who’s raising six children on Chicago’s often hardscrabble West Side.

For Mark and Toni Quero of Northfield, Vt., the rebates — $1,200 total — went straight into the bank, to be saved for home heating oil and replacing a picture window in their home to make it more efficient.

Quero and her husband earn about $44,000 a year between his job as a maintenance man at Norwich University and her Social Security disability checks.

So they’re holding $1,000 for oil and $200 for the picture window replacement. The couple spent $800 on heating oil last winter, up from $600 the year before, and they expect it’ll be higher this year.

When Houck’s $600 rebate appeared in his bank account, it allowed the 24-year-old to splurge a little for the first time in months.

Splurging is relative for an actor-for-hire doing everything from carpentry to backstage lighting work to video game bug-testing in order to pay the rent.

Besides $30 on tickets to see a play a friend was in, his big “fun” purchase was the Wii game — “Super Smash Bros. Brawl.” He allowed those indulgences only after spending $245 on new head shots to get his face and name out to directors, $68 to renew his subscription to an acting submission service, and most of the rest on food, gas, laundry and bills.

Angela Anderson, 50, of York, Pa., thought for weeks about how she might spend her tax rebate. She could create a gas account for the increased cost of her 54-mile daily commute, pay off credit-card debt, buy a piece of local original art, put some toward a trip to Europe, and maybe use anything left over to treat herself with a massage and manicure.

Alas, when the money showed up, it was less than expected at $300, owing to the fact that she was unemployed for much of last year. So by the time she wrote two $250 checks to her son Michael and her daughter Jenna to support them on unpaid college internships, it was more than gone.