Don't Take That Rebate Check to Wal-Mart

4 Better Things To Do With Your Windfall

Wal-Mart is waiting for your check.

The world's largest retailer, which made $819,976 in sales every minute during the fourth quarter of its 2007 fiscal year, is expecting to see you walk through its doors with an IRS rebate check in your hands. But there is a more patriotic thing you can do.

Beginning this May, the U.S. Treasury will start sending "economic stimulus payments" to more than 130 million Americans. The vast majority of individuals who qualify for a stimulus payment will not have to do anything other than file their 2007 individual income tax return to receive their rebate. In most cases, the payment will equal the amount of tax liability on the return up to a maximum amount of $600 for individuals ($1,200 on a joint return) and a minimum of $300 for individuals ($600 on a joint return). The government made the same deal with taxpayers back in 2001, when the Treasury sent "advanced payment" checks of $300 to single tax filers and $600 for joint filers.

When you spend your rebate check at America's signature retailer, you are responding to the government's stimulus like a true patriot. In a speech five days before Christmas of 2006, President George W. Bush said, "A recent report on retail sales shows a strong beginning to the holiday shopping season across the country -- and I encourage you all to go shopping more."

The White House/Congressional economic stimulus package should be labeled for what it is: the Wal-Mart/Beijing Welfare Subsidy of 2008. The "stimulus" plan is an income transfer program from the U.S. Treasury, to Wal-Mart, and from there to its chief trading partner, China.

Wal-Mart issued a press release shortly after the tax rebate passed applauding "the President and Congress for recognizing the economic struggles of everyday Americans and moving quickly to provide much needed tax relief." But the real relief is going to Wal-Mart.

Here's how it's supposed to work: The American taxpayer takes this windfall of discretionary income, drives to Wal-Mart, and buys another MP3 player made in China. Much of the Treasury's investment passes to the Walton family, and to their sweatshop vendors in Guangdong Province.

In an interview with Reuter's, Wal-Mart acknowledged that the tax rebate will trigger a "rapid response" at their check out line. "I would like to think that, as in the past, we have gotten at or more than our fair share of our checks," Wal-Mart's Chief Financial Officer Thomas Schoewe told Reuters. This Treasury infusion is a downpayment on Wal-Mart's estimated $9 billion worth of direct imports from China this year, not counting its indirect imports. The American consumer is just a pass-through.

One of the groups that lobbied the hardest for this "stimulus," the National Retail Federation, estimated that 41% of the checks being mailed this May will be spent. This cash injection is supposed to jump-start the economy. But when spent at stores like Wal-Mart or Home Depot, it won't create more jobs, or higher wages, or even more American production. It will simply rise to the top management, or be exported overseas, where inventory procurement occurs.

A 2005 study by the Economic Policy Institute, U.S.-China Trade, 1989-2003, found that America's growing trade deficit with China has had an increasingly negative impact on the U.S. economy, triggering job losses in the manufacturing sector in every state in the nation. The EPI study found that 1.5 million jobs were lost to lower-wage Chinese competition in the 14-year period between 1989 and 2003. During this period, the U.S. trade deficit exploded twenty-fold, like Chinese fireworks, from $6.2 billion to $124 billion. In the month of January 2007, the U.S. trade deficit with China stood at -$21.27 billion, or -$255 billion annualized.

The EPI study noted that the pace of job loss has more than doubled since China entered the World Trade Organization (WTO) in 2001. China's exports to America of sophisticated electronics and communications equipment requiring skilled labor are growing much more quickly than its exports of low-value, labor-intensive products. "Everyone knew we would lose jobs in labor-intensive industries like textiles and apparel," one EPI researcher said, "but we thought we could hold our own in the capital-intensive, high-tech arena. The numbers we're seeing now put the lie to that hope -- as China expands its share even in core industries such as autos and aerospace."

"Right now," says Mike Duke, Vice Chairman of Wal-Mart's International Division, "in many markets of the world, particularly mature markets, the consumer is under a lot of pressure. We are perfectly positioned for this time."

But what if Americans don't take their Treasury check to Wal-Mart? Here are 4 better alternatives:

1. Put It Towards Your Credit Card Debt: According to the Federal Reserve's most recent Survey of Consumer Finances (SCF), about 76% of U.S. families carried some form of debt in 2004. The first thing Americans should do with their rebate is pay off their plastic debt. Outstanding debt on bank-type credit cards rose from $181 billion in 1991, to $645 billion in 2004. This debt is a drag on our economy, and every patriotic American family should first strive to wipe out its own red ink.

2. Save it: A survey conducted at the University of Michigan, found that only 22% of households in 2001 said they would spend their Treasury rebate. Other consumers said they would either save the money or use it to pay off debt. Personal saving jumped in 2001 by precisely the amount suggested by the survey results. The Michigan study said that since they were mainly saved, the 2001 advanced payments provided little stimulus to the economy. The personal savings rate in America hovered just around 0% in 2007---the lowest level in the last twenty years. According to the University of Michigan report, "Direct evidence on consumption and investment spending in response to the (2001) tax changes suggests that these policies provided only modest stimulus."

3. Spend it locally: Money spent on local merchants recycles 7 or 8 times more productively than money spent at national chains. Your dollar recirculates only if its stays local. When it gets wired overnight to corporate headquarters, it has been extracted from the local economy as if it had been strip-mined.

4. Donate it to a local charity: You can help needy people in your hometown, and claim your donation as an itemized deduction to lower your taxable income to the IRS. This is at least a more honestly-earned tax break, instead of the retailer-inspired plan developed by the White House and Congress.

President Bush wants you to "go shopping more," and Wal-Mart has more than 4,000 U.S. locations to take your check. But it would be more patriotic to reduce your own personal debt, or boost your own personal savings, rather than let a multi-national corporation spend it for you in China.

Al Norman is the founder of Sprawl-Busters, and the author of "Slam Dunking Wal-Mart."