To spend or not to spend?

Tax rebates are supposed to help the economy by spurring Americans to pry open their wallets and spend.

But the rebates might not do the trick, based on an unscientific survey yesterday of Philadelphia and South Jersey residents.

Many of the people interviewed along Centre Street in Merchantville and at the Italian Market in South Philadelphia said they would either save the rebate or use it to pay bills.

"I would probably put it in my savings account and hang onto it in case things got tight. I don't think I'd run out and spend it right away," said Don Feiler, a Pennsauken resident who has an e-commerce design and consulting business in Merchantville.

In 2001, the last time Washington offered tax-rebate checks to boost the economy - with 92 million households getting checks for $300 or $600, at a total cost of $38 billion - the impact was muted.

"The economy reacted very slowly to the stimulus package," said Victor Li, an associate professor of economics at Villanova University. "People did not spend. They saved."

That is what Li said he did in 2001 and would do again, if he received a rebate.

A 2002 University of Michigan survey found that nearly 75 percent of those who received rebates either increased savings or paid off debt.

Jessica Weinstein, who was selling cosmetics in Merchantville, said at first that she would "go shopping. Who wouldn't?"

On second thought, however, Weinstein, who lives in Cumberland County, said she would "probably just put it in the bank for now, until I need it."

Her coworker, Ryan Melissa Landberg, has a practical use for the money. "I'd put gas in my car. . . . I'm in sales, so I drive a lot," she said.

Pennsauken resident Gertrude Collins said she would send some of the money back to the federal government. "I would put it on my taxes that are due," she said.

At the Darkroom Studios, which rents darkroom and studio space to photograhpers, Matthew Fegley said he would pay bills, including credit card bills for Christmas.

If the rebate were $300 - one of the amounts under consideration - Fegley said it would not be enough to invest.

Fegley, who handles outside sales for the photography business, said the economic downturn that had Washington officials scrambling to avert a recession did not surprise him, because of what he saw when he worked at a large South Jersey mortgage operation. "It was screaming for trouble," said Fegley, who lives in Maple Shade. "People rely on credit way too much these days."

Brad Walker, owner of the Darkroom Studios, said the business component of the proposed economic-stimulus package - allowing businesses to immediately expense 50 percent of the cost of capital equipment - probably would do little good.

"If you need equipment, you're going to buy it. A little tax break isn't going to make a difference," said Walker, who opened Darkroom Studios seven years ago.

As for his personal rebate, Walker said he would save it.

Li, the Villanova economist, said tax rebates were aimed at people who had cut back on spending because they feared losing their jobs or were simply worried about the economy. The idea is to make them feel comfortable enough to loosen their purse strings.

The problem is that people are just as likely to save in case things get worse.

Feiler, who has two boys and whose wife is studying full time at the Lutheran Theological Seminary in Philadelphia, said: "Whenever the economy turns down and money pops up, it usually goes into savings to build a cushion."

In South Philadelphia, there were glimmers of hope that some of the rebate money would quickly find its way into the economy.

Nicole Mercurio, a freshman at the University of the Arts, said she would either save the money for tuition or spend it on costly art supplies, such as paints, drawing pads and computer software.

Mercurio, who worked for a medical publisher before starting school, was skeptical of the rebates. "The last time around it didn't make much of a difference," she said.

Center City residents Tina and Douglas Pappajohn, alone among the 10 people interviewed yesterday, said they would do something fun with their rebate.

What's that?

"Maybe go on a little unexpected holiday," Tina Pappajohn said while shopping at the Italian Market.

It might not be enough to go someplace warm, but they could visit "New York for the day," she said.


Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.