One thing that congressional Democrats and the Bush administration agree on: An economic stimulus plan must be approved quickly, so the money can be applied immediately to economy, which these days is always described as “struggling.”
So the tweaking that needs to be done to President Bush’s proposal should be done quickly.
The proposed $150 billion plan would provide one-time rebate checks to people who pay federal income taxes and investment incentives for businesses that equal about 1 percent of gross domestic product.
The problem with the rebate idea, Democrats point out, is that it leaves out millions of the working poor, who do not make enough to pay income taxes, but do pay Social Security and Medicare payroll taxes.
Charles Schumer, chairman of the congressional Joint Economic Committee, says it’s unfair the formula only considers income tax. In addition to the working poor, people making $35,000 to $50,000 pay a lot of federal taxes, he said, but much of that is not income tax but directed to programs such as Social Security.
House Ways and Means Committee Chairman Charles Rangel said Democrats want to ensure that low and middle-income families directly benefit from any stimulus package — for reasons of fairness, yes, but also to get people spending.
“Reaching out to the poor, the near-poor, the unemployed is really not a question of compassion. They’re doing this for economic reasons,” Rangel said.
Obviously the working poor, and those making under $50,000, could use an economic boost more than those who make $200,000 or more a year. People on the low end of the income scale are more likely to immediately spend the money, which is what the government is looking for.
Families of four earning less than $24,900 a year would not get a rebate. Chad Stone, chief economist at the Center on Budget and Policy Priorities, estimates that about 22 million households file income tax returns but do not pay that tax because their earnings are so low. An additional 22 million households do not file a return, including many older people on fixed incomes.
Meanwhile, a Reuters/University of Michigan preliminary survey of consumer sentiment rose to 80.5 in January, up from December’s 75.5 reading — the lowest in more than two years. Economists had been expecting consumer confidence to dip even further in January, and were tipping a figure of 74.5.
Of course, those answers were given before the announcement of the rebate program. Surely everyone can agree that consumers’ confidence is still sufficiently shaky enough to warrant a tax refund … right away.
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