Americans' Tax Cuts Going into Gas Tanks

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High gas prices are draining consumers of the extra money they're getting from the cut in Social Security taxes.

Consumer spending and personal income rose last month due to those cuts. But while Americans made and spent more, economists say more than half of that money went straight into people's gas tanks.

Gas prices have jumped more than 50 cents in the last year.

Currently, the average price for a gallon of regular gas is $3.58, according to the American Automobile Association.

Analysts say there's a psychological factor when gas prices, a consumer necessity, keep rising. Those higher prices tend to rattle consumer confidence. People feel poorer, and they're less likely to spend freely.

"When food and gasoline prices are rising, it causes people to hunker down," said Chris G. Christopher Jr., senior economist at IHS Global Insight.

Ultimately, less spending can hurt job growth because businesses will feel less confident. Christopher said a rise of just 25 cents a gallon in gasoline prices, if it persisted for an entire year, could cost the economy 270,000 jobs.

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