To Spend Or Not Spend: Will Tax Deal Spur Economy?

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Kenneth Reitz plans to spend his tax money on Apple products and possibly a dinner with his fiance.

Kenneth Reitz plans to spend his tax money on Apple products, e-books, apps and possibly a dinner with his fiancee. Courtesy of Kenneth Reitz hide caption

toggle caption Courtesy of Kenneth Reitz

Democratic leaders in the House say they want changes to President Obama's tax compromise, but even with any changes millions of Americans will likely see a little extra money in their paychecks next year as the proposal calls for a one-year payroll tax cut.

The goal is stimulating the economy: For someone earning $50,000, the payroll tax cut works out to $1,000 of additional take-home pay spread out over a year.

NPR asked its fans on Facebook what they are planning to do with the extra cash: More than 1,000 people responded, but few sounded like Kenneth Reitz.

"If I'm getting 50 extra dollars per paycheck, and I know this, then it would be a good excuse to go out and spend $50 for no reason," he said.

The 22-year-old software engineer's spending plans involve iPhone apps, Kindle books, maybe even a new Apple device of some kind. Oh, and maybe a night out with his fiancee.

"I'll say, 'Hey, Bessie, let's go and let's go get some drinks and let's go eat at a fancy restaurant — or let's eat at a restaurant because we get 50 free dollars," he said laughing.

But when it came to the comments, Reitz was the exception rather than the rule. Most people were like Vanessa Willis.

"We're not stimulating anything," she said. "Absolutely not."

She and her husband expect to get about $1,000 out of the deal.

"It will go to Mr. Visa primarily. He will get two-thirds of that, as we try to pay down our credit card debt," she said. "And about a third of it will go toward the increase in my health insurance costs."

In other words, no fun stuff at all.

Vanessa Willis plans to use any tax benefit to pay down credit card debt.

Vanessa Willis, pictured with her husband, Brad, their daughter, Libby Jeanne, and their son, Hatcher, says she and her husband plan to use any tax benefit they receive to pay down credit card debt. Willis says the money will go to "Mr. Visa." Courtesy of Vanessa Willis hide caption

toggle caption Courtesy of Vanessa Willis

"No trips to Disney, no improvements on the house. Just sort of routine things that we need to do," Willis said.

In 2011, her health insurance bill is set to rise by $30 a month — rising health costs were a common theme in the Facebook comments. Willis says paying off credit card debt became her family's No. 1 priority when her card company doubled the interest rate.

"This money that we'll get from the tax cut will definitely go toward helping us dig out of the hole," she said.

Andrea Weber is digging, too. Her husband lost his job in 2009 and was out of work for 10 months.

"It really rocked our world," Weber said.

They are both working now, and would even be considered upper middle class, but their "money diet" continues.

"We became coupon people, because it was like, coupons are like finding lost money on the ground," she said. "It doesn't take that much effort. So this is like my government coupon, you know."

Weber says every penny of the extra money is going to pay off debt. Like Weber, a large number of the people commenting said they were planning to pay bills.

That isn't exactly the most direct way to stimulate the economy, says Robert Brusca of Fact and Opinion Economics.

"Paying bills is not stimulative immediately," Brusca said. "But it might have a bigger stimulative effect down the road, once people have gotten their bills in order they can spend again."

That said, Brusca is not convinced that what people say in Facebook comments is what they will end up doing.

Len Burman, a professor of public affairs at Syracuse University, looked for economic clues in the comments.

"What your Facebook fans are showing you is the exact trade-off that we see in the data, that some people save it and some people spend it," Burman said.

NPR's Facebook query was clearly not a scientific sample, but Berman says it seems like many people are cautious about spending.

There are also people like Rob Atkinson, 25, who lives in Moscow, Idaho.

Atkinson works at a local grocery store and makes less than $20,000 a year. As a result of the tax compromise, he and other low-income earners could actually see their take-home pay reduced a bit. Atkinson isn't sure he'll notice.

"My paycheck changes from pay period to pay period because I work by the hour," he said.

He's only expecting to lose about $4 a pay period.

"I am a little disappointed. Maybe a little frustrated, I guess," he said. "But I guess I'm just sort of a little indifferent."

He didn't have any big spending plans anyway.



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