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Fears of a recession coupled with an unsteady stock market led President George W. Bush in January to introduce an economic stimulus package aimed at boosting public spending that includes nearly $150 billion in tax rebate checks for low-to moderate-income earners and tax breaks to struggling businesses. The $168 billion stimulus plan was approved by Congress on Feb. 7. According to the Treasury Department, rebate checks are expected to begin distribution in early May.
Much media attention has been placed on the plan’s objective to distribute rebate checks ranging from $300 to $600 for more than 100 million individuals who did not pay federal income tax but who earned more than $3,000 last year, $600 to individuals who paid income tax, and $1,200 to couples filing jointly (including an additional $300 for each child).
Individuals who earn more than $75,000 and couples making more than $150,000 will receive less. The package includes aid for more than 20 million seniors and 250,000 disabled veterans. Additional provisions of the legislation allow businesses to purchase new equipment this year and deduct an additional 50% of the cost in 2008.
However, it is the benefits left off of the package that economist Algernon Austin believes might actually hurt most low- and average-income African Americans. Austin, the director of the race, ethnicity, and economy program at the Economic Policy Institute, notes that the plan excludes aid to state governments, funding for infrastructure projects, extending unemployment insurance, and increasing food stamp benefits and Medicaid payments to states. “These types of policies will disproportionately benefit black Americans because blacks are disproportionately poor and low-income,” Austin says. “This is a very weak stimulus package.”
Austin says that without aid from the federal government, state economies–some of which are already faltering–will begin to cut back social service programs such as Medicare and SCHIP (State Children’s Health Insurance Program) at a time when a recession is going to increase the demand for these programs. On the other hand, repairing bridges and schools and various other infrastructure projects would directly produce jobs.
R. Donahue Peebles, chairman and CEO of the Peebles Corp. (No. 13 on the be industrial/service 100 list with $403 million in sales), a real estate and hotel conglomerate, agrees that economic growth depends on customer spending.
“It is important that people who have jobs start spending, by traveling, staying at hotels, and consuming products so that people in the service industry can have work,” he advises. Peebles also believes that accelerated depreciation, one of the bonuses the plan extends to business owners, will encourage businesses to invest in new equipment.
Consumers interested in calculating their stimulus rebate amount can use the online Economic Stimulus Rebate Calculator at BlackMoneyMatters.com.
While the government and business owners like Peebles hope the public will purchase big-ticket items with the anticipated rebates, Gil Michel, president of BlackMoneyMatters.com. says the targeted consumers will likely catch up on bills. “Many times, when the funds are in anticipation, they are already accounted for,” he says. “These are people with real economic needs, so