Stimulating offer? Bush suggests $800 for every taxpayer, $1,600 for families

The Associated Press

Talking stimulus in the White House on Friday.

Featured Topic | Posted 30 weeks 4 days ago

Stimulating offer? Bush suggests $800 for every taxpayer, $1,600 for families

A check from the U.S. government may be in the mail soon. In an effort to stimulate the wobbly economy, President Bush today announced a $140 billion economic stimulus package. The big idea floating around the White House is tax rebates worth $800 for individuals and $1,600 for families.

Bush said that a fiscal stimulus would "provide a shot in the arm to keep a fundamentally strong economy healthy." But some economists say that temporary spending increases and one-shot tax rebates do not always have the intended effect.

Does a rebate check sound appealing? Or would more permanent tax cuts be a better boost for the U.S. economy?

Ben likes: No stimulus gimmicks, please

Bill Thomas & Alex Brill/The Wall Street Journal

Perhaps the easiest "stimulus" package Washington could to enact would be to drop money from planes into the hands of voters/consumers. However, the economic evidence from the 2001 experience suggests this is an ineffective tool. University of Michigan economists found that most rebates were saved, not spent. While this result may be a disappointment to those of us who thought this approach would be effective, Congress must be willing to learn from past legislative experience. Popular versus effective is sometimes the difference between politics and economics.

Joel likes: A chicken in every pot

Kevin Depew/Minyanville

We saw a summary on Bloomberg noting that Treasury Secretary Henry Paulson said on the "Today" show the administration is focusing on consumers. "A big part of the program should be focused on consumers, individuals, families, getting money to them because they will spend it,'' Paulson said on the show.
No, they won't spend it. That's the key. That's the disconnect. As the Congressional Budget Office in their review of potential fiscal stimulus responses noted, "a household’s propensity to consume appears to vary with its income and depends on expectations of the household of what will happen to that income over the longer term."