Bruce Bartlett Is Wrong

About this in his discussion on tax rebates:

By and large, people saved the money they received or paid bills (which is the same thing); very few used their rebates to increase spending.

The latest evidence shows that people did indeed pickup spending.

But Bartlett is probably right to argue that the rebates should be reconsidered given how rapidly the economy seems to have deteriorated since February. The best case for this that I've come across was made last month by PhD candidate Francisco Torralba at the University of Chicago (with a little help from BusinessWeek's Michael Mandel):

The growth of productivity, the value of output per hour worked, confirms the hypothesis that consumer expenditures were out of line with real income gains, at least over the last five years. Robert Gordon of Northwestern University estimates that trend productivity growth peaked in 2002, and has slowed down ever since (see Chart 2, via Michael Mandel's blog). The gap between long-term growth of GDP and consumption, on the other hand, has widened over the same period.
So, if the recent growth rate of expenditures was excessive, why is Congress rushing to prop it up? More importantly given that the stimulus will be financed with future tax increases: why are legislators borrowing even more from future prosperity? The answers to these questions have a lot to do with politics and very little with economics.