Understanding the 2008 Tax Rebate
So how will the 2008 tax rebate affect the United States economy during the second half of 2008? We need some facts and assumptions.
Fact 1: The size of the total 2008 tax rebate program is $168 billion.
There are several ways to use this rebate. You can buy goods and services, you can save it, you can invest it, you can pay off debt, or you can give it to someone or some organization. To positively affect the present "recession" issue, you will need to spend it. You will also have to spend it in a way to support the growth of the United States GDP.
Question 1: What % of the total tax rebate program will be spent to buy goods and services that will add to the United States GDP in the second half of 2008?
Assumption 1 about question 1: Given that we have had both state and federal rebates in the past there is information available to give us an idea.
Assume the answer to question 1 is 1/5 to 1/4 of the total rebate program. You can choose any numbers you feel are correct and complete the exercise with your numbers.
You will need to know the GDP for the third and fourth quarter of 2008. Referring to "The Relationship of GDP and GNP" under the heading of "How the United States Works" on this site, you can make another assumption. In 2004 it was ~$11 trillion. In 2005 it was ~$12 trillion. In 2006 it was ~$13 trillion. Given the slow down in our economy over the last months an assumption for 2008 could be ~$14 trillion. If you were to do some research and go to the website of The Bureau of Economic Analysis (www.bea.gov), you would find it to be forecasted in the first quarter of 2008 to be $14,194 trillion.
Assumption 2: The GDP for 2008 is $14 trillion. The GDP for the second half would be $7 trillion.
Calculations: 1/5 to 1/4 of $168 billion will add to the GDP in the second half of 2008 or $33.6 billion to $42 billion. Given the GDP for that period is $7 trillion, the % growth of GDP based on the rebate would be .48% to .6%.
This is certainly a respectable growth in GDP and more then it grew last quarter.
Our government has given us this rebate to stimulate the economy in the short term, so one good idea would be to spend it in a way to add to the United States GDP and enjoy.