KNOXVILLE, Tenn. (AP) For many Americans, those tax rebate checks meant to stimulate the economy will be coming just in time for a vacation.
The centerpiece of President Bush's $168 billion rescue package for a wobbly economy is a tax rebate program that will put up to $1,800 in the wallets of a couple with two kids in a matter of weeks, the prime season for planning summer trips and early fall getaways.
"The timing of this couldn't be better for travel tourism," said Steve Morse, an economist and director of the Tourism Institute at the University of Tennessee.
Some 130 million people will be getting checks $600 for an individual, $1,200 for a couple, $300 for each child from May 2 through July 11.
Critics suggest debt-burdened consumers will use the money to pay old bills, rather than make new purchases.
An Associated Press-Ispos poll seems to confirm this with 45 percent planning to apply the rebate to debt, 32 percent planning to invest it and only 19 percent planning to spend it.
"But we have seen some behavior that even when they are pinched, vacations are a right of life," Morse said. "People will borrow money to take a vacation, it is that important to them."
Morse and former grad student Warren Jahn make the case for tax rebate optimism in the tourism industry in a new report. It relies heavily on research by others and a previous study by Morse that plays down even rising gas prices as an obstacle to consumers determined to relax in the Great Smoky Mountains.
The research suggests that consumers will say "one thing before they get the money in their hand but after they get it, they actually spend more than they got in the rebate," he said.
Morse cites a November study by three economists from the Federal Reserve Bank, the University of Nevada-Reno and the University of Pennsylvania's Wharton School examining consumer habits from a similar though smaller rebate in 2001. The researchers tracked activity of 75,000 credit card accounts.
The study found that many consumers used the rebates to pay down credit card debt, just as pre-rebate surveys suggested they would do. But three to nine months later, they used their newly freed-up credit to buy even more. On average, they spent 40 percent more than the original amount of their rebate.
"If consumers use the 2008 tax rebate in a similar fashion as the 2001 rebate study suggests, consumers will spend more of the (2008) rebate than originally planned, generating opportunities for boosting 2008 travel demand," Morse's report says.
"We are sure hoping that he is right," said Leon Downey, chairman of the Southeast Tourism Society and executive director of tourism in the Smokies tourism community of Pigeon Forge.
Morse's report created a buzz last week at a Southeast Tourism Society meeting in Asheville, N.C. Hotel and travel destination professionals from 12 states from Little Rock, Ark., to St. Augustine, Fla. left with plans to order up ad campaigns and design getaway packages aimed at the rebate audience.
"We will be planting that seed," Downey said. "I think lots of people in the travel industry will do the same thing."
