James Surowiecki writes in the January 26 New Yorker that the impact of rebates on economic behavior may vary.

A rebate in the form of a tax cut that increases weekly take pay may be spent more readily than a single large lump sum payment. Perhaps such a lump sum payment may be used to reduce debt or save for a rainy day, especially if it occurs during a time great economic insecurity.

People will be more likely to spend based on how wealthy they feel. In an economic atmosphere of uncertainty, escalating unemployment, drastically declining retirement accounts and credit tightening lump sum rebates not have the stimulus affect expected.

If the rebate is seen as an increase in their wealth they may be more likely to save it. If it is seen as an increase in their income, they may be more likely to spend it.

Surowiecki recommends giving it in small amounts over time.

A small rebate over time is another way of describing a tax cut.

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