Getting rebates out won’t be easy
Jan 25th, 2008 by Afiya
Tony Pugh
McClatchy Newspapers
Jan. 24, 2008 12:00 AM
WASHINGTON - As Congress and the White House craft an economic-stimulus package, there is growing concern that it can’t be enacted and implemented quickly enough to forestall a recession.
President Bush is calling for an estimated $140 billion stimulus package that includes one-time tax rebates to spur immediate spending and tax breaks for businesses to spur investment. Democrats want additional measures, including more money for Medicaid, extended unemployment insurance, increased food-stamp benefits and higher Social Security payments.
Democratic and Republican leaders appeared close to agreement with the White House on Wednesday night on emergency tax cuts and benefit increases to jolt the economy out of its slump
“We’ll have more to say tomorrow morning,” said House Minority Leader John Boehner. “We’re hopeful.”
In a report outlining several stimulus proposals, the Congressional Budget Office said that the most effective policies boost economic activity as much as possible and as fast as possible.
“If the policies do not generate additional spending when the economy is in a phase of very slow growth or a recession, they will provide little help to the economy when it is needed,” the report concluded.
Both sides have pledged to work quickly to enact a package, but even if they succeed, getting the cash out of the federal bureaucracy won’t be easy.
The Internal Revenue Service has already begun processing 2007 tax returns, and it is reprogramming its computers to comply with changes in tax law that Congress passed late last year, which means that the IRS probably couldn’t begin mailing any rebate checks before late spring. Short-term payroll-tax holidays would be even harder for the IRS to process quickly.
It would take the Social Security Administration, which has an outdated computer system, at least six weeks to begin distributing additional money to retirees. And new federal public works or other projects designed to stimulate the economy generally “require years of planning and preparation,” the CBO said.
It’s not clear, then, whether the federal government can act fast enough to prevent or even cushion a recession, or whether the effects of any stimulus plan would be felt when the economy was already recovering.
Although the proposed tax rebates echo what the IRS did for taxpayers in 2001, those checks were issued after the bulk of income-tax filings had been processed.
