President Bush's economic stimulus plan did not spell out exactly how much the average guy/gal would get or whether they would receive actual rebate checks in their hands.
The idea of handing over, say, $800 per taxpayer, as some in Congress suggest, is that people who don't have much money won't put it in the bank. They will spend it, and fast -- creating a "multiplier" effect that will stimulate the economy.
The Associated Press notes that Bush's plan follows the "three T's" of economic stimulus plans: timely, targeted and temporary.
In 2001, the Bush tax cut plan resulted in a $300 tax refund per taxpayer. The AP reports:
A study showed that Bush's 2001 stimulus package was a success in this
regard, with two-thirds of the tax refund payments getting spent in the
first six months. The recession that year was mild. It began in March
but was over by November even though the country got hit during that
period by the Sept. 11 terrorist attacks.
House Speaker Nancy Pelosi (D-Calif.) said Congress will have a package
ready for action by Jan. 28, when Bush delivers his State of the Union
address.
Some
in Congress have said any plan should include extended unemployment
benefits and a boost in food stamp payments, neither of which were mentioned by the president today.
On this, The AP reports:
"Extending unemployment benefits helps bolster confidence," said
Mark
Zandi, chief economist at
Moody's Economy.com and the author of the
study. "If people start running out of their unemployment benefits,
they cut back drastically on their spending and it also scares people
around them. It is very debilitating on consumer confidence."
Providing
states with federal support so they don't have to cut their own
programs provides $1.24 in increased spending for each $1 it costs,
while a targeted tax cut provides $1.19 boost, according to Zandi's
study.
The reason these items had a bigger payout than they cost
reflects the fact that the assistance goes to poorer people who spend
the extra benefits quickly. This helps trigger what economists call the
"multiplier effect" in that a dollar of increased spending gets
recycled through the economy, boosting the spending of other people.
By
contrast, other proposals which benefit wealthier individuals such as
across-the-board tax cuts and reductions in dividends and capital gains
taxes were found to return less than their cost during the first year.
Get Local- Ask people what they would do with $800. For economic stimulus packages to work, people have to spend it, not do something responsible like pay off their credit cards or pop it in a savings account. They may spend it on gasoline, fuel oil or a flat screen TV.
- Talk to people who are nearing the end of their unemployment benefits. Why has it been so difficult to find work? What will they do without an extension?
- Talk with food bank organizers. How important would the food stamp increases be?
The initial AP story on the president's proposal to stimulate...
