If government rebate checks ranging from $300 to $1,200 for just about every household don't spur a consumer spending spree strong enough to cure what ails the economy, Congress is ready to throw more money at the problem.
Skeptical economists and a worried public question whether the rebates for more than 130 million Americans and tax breaks for businesses will be quick enough or effective enough to avert a recession, though analysts generally believe the $168 billion economic rescue package President Bush planned to sign Wednesday could help prevent the current downturn from ballooning into a crisis.
Democrats and Republicans who put aside deep differences to craft the plan and rush it to enactment were to join the president at the White House for an afternoon signing ceremony.
The package is designed in part to inoculate lawmakers from vote blame should the economy continue to lag as the November elections bear down. Congressional leaders already are considering more economic rescue measures that could include transportation spending, unemployment aid and measures to address the housing crunch that's at the root of the current economic doldrums.
The centerpiece of this stimulus plan is rebates expected to go out beginning in May to taxpayers and low-income people, including seniors living off of Social Security and veterans who depend on disability checks. Businesses would get tax breaks for investing in new plants and equipment.
Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples from the Internal Revenue Service, with an additional $300 per child. People earning at least $3,000 and those who owe little to no taxes would get $300 for singles, $600 for couples. Those making more than $75,000 and couples with income exceeding $150,000 are to get smaller rebates &
$50 less per $1,000 they make over those thresholds.
Senate Majority Leader Harry Reid, D-Nev., this week said the measure was "far from a panacea," adding that, "much more should be done to address our economy's longer-term problems." On Tuesday he said the Senate would consider "another stimulus package or two" on housing and other issues. The legislation could be ready for action by late February, aides said.
In the meantime, economists are debating how effective the rebates will be, with critics arguing that debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.
An Associated Press-Ipsos poll found that only 19 percent of those surveyed said they planned to spend their rebate checks. Forty-five percent said they would pay bills, while 32 percent said they planned to invest the money.
The last time the government sent out rebates, in 2003, recipients spent a little less than a third in the first six months, and about two-thirds within the first year, according to findings by the University of Michigan Survey of Consumers, cited by congressional tax analysts. After rebates were sent out in 2001, just 22 percent said they would mostly spend them &
rather than saving the money or using it to pay off debt &
and only one-third of the rebate was spent in the short run, according to the same study.
Lawmakers argue it will take much more to restore confidence to an economy battered by a housing slump and mortgage mess. Some are pushing for broad mortgage reform, including measures to crack down on risky loan practices and help homeowners with subprime loans avoid default.
"What we've done with the stimulus bill is we've reacted to a weak economy without going back and addressing the cause," said Rep. Melissa Bean, D-Ill. "The stimulus package is bailing water, but now we've got to go back and plug the leak."
The bill would raise temporarily to $729,750 the limit on Federal Housing Administration loans and the cap on loans that Fannie Mae and Freddie Mac can buy. Those measures are designed to provide relief in the market for "jumbo" mortgages and help more homeowners refinance into government-insured loans.
Bush prepares to sign rescue taxes package