It has been

fashionable lately to say that the $38 billion in tax-rebate checks the government started mailing out last week will have little discernible effect on the economy.

Times are tough, after all, and though consumer spending is the only thing that's kept the U.S. out of recession so far, it has faded considerably from year-ago levels. With the economy still stalled, layoffs mounting and the stock market mired, a tendency toward thrift seems only natural. Polls conducted ahead of the rebate suggested as much. A typical one from

The Washington Post

and

ABC News

found that only one-fifth of respondents expected to spend their checks; most would pay off debt or put the money into savings. We are a virtuous nation.

Or maybe just a nation of people who like to say they are virtuous.

This morning's weekly sales call from

TheStreet Recommends

Wal-Mart

(WMT) - Get Walmart Inc. Report

, which accounts for 8.5% on nonauto sales in the U.S., suggests that the checks actually are getting spent.

To the Metal

Wal-Mart found that customers who cashed their rebate checks in the store (the company is cashing rebate checks without charge) spent 25% to 30% of the refund on its wares. And although only a relative handful of people cashed their checks at Wal-Mart, the store said that the things they bought were "consistent with the trend seen in the store as a whole," suggesting that customers who cashed their checks at the bank were also hitting the stores. The company said that electronics purchases led the way, particularly televisions, computers, video games and DVD players.

"This kind of anecdotal evidence suggests, at least, that the most pessimistic views are wrong," says Lehman Brothers economist Ethan Harris. "The fact that people are immediately spending 25% to 30% suggests that they'll spend more before they're done."

"I think it's very good news," says Miller Tabak bond market strategist Tony Crescenzi. "And it's just going to continue -- more of the same until October," when the last tranche of checks gets spent. Crescenzi thinks that the increased sales will put many companies into a position where inventory levels are too low. That will prompt them to step up production above demand, providing the typical accelerator-effect that helps the economy turn the corner and return to growth.

The Lower-Case Scenario

When economic growth returns, however, it may lack the vigor that many investors are hoping for. Revised

gross domestic product numbers for 1998 through the first quarter of this year show that corporate profits were lower than had been thought, while personal income was higher. In short, wrote Morgan Stanley chief U.S. economist Richard Berner in a note today, the new data show that "the economic boom wasn't as steamy, productivity growth was slower, paychecks were fatter and profit margins were squeezed much harder."

Even as the economy regains its footing, companies may continue to cut back on labor costs in an effort to bolster those lower profit margins. That may put a cap on consumers, preventing them from returning to past ebullience. In the typical first year of an economic recovery, GDP grows 5% or 6%. This time around, overcapacity and corporate cost-cutting will probably muffle growth some.

"There are enough negatives hanging over the corporate sector that it's just not going to turn very fast," says Harris. "You're going to get a lower-case 'v' recovery."