STEVE INSKEEP, host:
It's been several weeks now since the U.S. government began cutting tax rebate checks. They've been put in the mail or deposited directly into the bank accounts of millions of Americans who were supposed to spend the money and somehow improve the economy.
To find out if it's working, we've brought in David Wessel. He's economics editor of the Wall Street Journal and a regular guest here. David, good morning once again.
Mr. DAVID WESSEL (Wall Street Journal): Good morning.
INSKEEP: So we're talking about several hundred dollars per check for most families, except people at the upper end of the income scale. Are people spending that money?
Mr. WESSEL: Yes. The early evidence is actually that people are spending this money at the store. Wal-Mart reported that it had cashed $350 million worth of these rebate checks and that it had boosted its sales in May. And the government's retail sales numbers for May showed a surprisingly large increase, given the rest of the economy, and that also is being attributed to consumers spending this money.
INSKEEP: Just so I understand, if you say Wal-Mart cashed the checks, does that mean somebody handed the check directly to Wal-Mart to buy goods or is Wal-Mart doing some banking here?
Mr. WESSEL: Wal-Mart's doing some banking here. Wal-Mart, unlike some other retailers, offered to cash these checks for no fee. But when the May results for Wal-Mart, K-Mart, BJ's Wholesale Club came out, they all mentioned that they thought that people were spending the stimulus checks (unintelligible)
INSKEEP: And so some of that early conventional wisdom that people would just use it to pay down debt may not be entirely true.
Mr. WESSEL: Some of that wisdom was not entirely true, but some of it was. We won't know for some time how much was saved and how much was spent. We do know on thing, that for a lot of families this offset the increased cost of gasoline. Doesn't mean it didn't do any good; it just means that from the point of view of the economy, spending might had been even worse if the rebate checks hadn't been distributed.
INSKEEP: Although I have to ask if the place that these are being spent is a place like Wal-Mart - isn't that a company that was already weathering the economic hard times pretty well 'cause they're selling cheap stuff and people might be going there instead of Nordstrom?
Mr. WESSEL: Wal-Mart is just a good barometer of the economy because they have such good information in real time and of course these checks were intended to go to middle-class and working-class Americans, the kind of people who shop at Wal-Mart. One thing you often hear is that if people are spending at Wal-Mart and if Wal-Mart imports so much of the stuff it sells, is this stimulus really helping the U.S. economy or is it helping the foreigners?
And it's a good question because every dollar consumers spend, a good chunk of it does goes overseas. And I think what we're seeing is that there are a lot of middlemen here who profit. The people who work at Wal-Mart live in America and the people who are operating the warehouses live in America. So some of these benefits do spill out overseas, but it seems to be having some benefits here.
INSKEEP: Does this add up to enough to prevent a recession if it's still in time to do that?
Mr. WESSEL: Probably not. It probably makes a recession somewhat less likely. The economists tell us that the current quarter, the second quarter and the third quarter will be boosted by this, but there's so many other things going wrong with the economy, from falling house prices to rising gasoline prices that in my view it won't be enough. It'll mean the recession is less deep but it won't be enough to prevent one.
INSKEEP: Are consumers feeling much more confident than they were a few months ago?
Mr. WESSEL: No. Consumer confidence is measured by surveys, where they call a lot of people up and they ask them how they're feeling and they're in the dumps. The consumer sentiment numbers are as low as they've been in any time in 20 years. But sometimes it's not so much important what people say they're feeling as what they do. And at least in May a lot of them were spending.
INSKEEP: David Wessel of the Wall Street Journal, thanks very much.
Mr. WESSEL: Thank you.
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