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American Morning

Is Tax Cut Helping Sluggish Economy?

Aired August 14, 2001 - 11:12   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Let's talk some more about money. President Bush hopes you'll take your tax rebate check to the mall and spend, spend, spend. Granted, only the first wave of checks is out there right now, but little evidence today the cash infusion is actually helping the sluggish economy.

CNN Financial News correspondent Valerie Morris joins us now from a Staples store in New York -- good morning, Val.

VALERIE MORRIS, CNN CORRESPONDENT: And good morning to you, Leon.

Yes, indeed, one thing that I can say directly with regard to rebate checks and the back to school season, everyone is saying cash it and spend it. At least a quarter of the rebate check is being spent by people doing their back to school selling and some economists are even saying as much as half of it will, in fact, be spent.

Kids, however, are not ready to commit until they know a little bit later on into the season what all their friends are wearing. So it is kind of a mixed bag. Parents are getting school supplies ready, buying all the things that you get at places like a Staples, for example, and then when it comes to clothing and other things, they'll have to be a little bit more wait and see.

Consumer spending accounts for two thirds of the U.S. economy and as a result of that, it is a major force in helping the nation stay out of recession. Back to school does set the tone for the second half of the year and, in fact, is a leading indicator for what could be happening at Christmas. But as we are in the season that is known as back to school, which varies, by the way, Leon, because it can go from as long as June until November. I remind you that some kids are already back in school, not waiting until that September 1 deadline.

But as we look at the buying, while irrational exuberance is gone, what we are seeing is that people are definitely still spending and that is what is keeping the economy going.

(BEGIN VIDEO CLIP)

UNIDENTIFIED SPEAKER: I think people are sad that these things are happening, but they're not going to change their way of living until it affects them personally, until somebody in their family gets laid off or until, you know, their budget is affected. Otherwise, they're going to keep doing the habits that they've had in shopping and, you know, just buying what they need.

(END VIDEO CLIP)

MORRIS: They're buying what they need and, again, the need comes down to what can you afford. A lot of people cannot do what the averages are, but let me just run them by you. Approximately $218 is spent by the average parent for a kindergarten or an elementary age kid; $246 for middle school; $265 for high school. Then the big jump comes, more than $600 per child for a college bound student.

So those rebate checks, although they arrived the last week in July, the bulk of them won't be seen until August. But everybody is saying that they will, in fact, help to do what is needed, and that is to put that money back into the economy -- Leon.

HARRIS: All right, thanks a lot.

Valerie Morris reporting this morning live for us from the streets of New York.

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