What Was the Bush Economic Stimulus Package?:
The $168 billion Bush Economic Stimulus Package was approved by Congress in 2008. The package eliminated taxes on the first $6,000 of taxable income for individuals and the first $12,000 of income for couples. The economic stimulus package was paid as a rebate check mailed out to taxpayers, in amounts as follows:
- Individuals up to $600.
- Married couples up to $1,200.
- Those with children $300 per dependent child.
The Bush Economic Stimulus Package gave 20 million retirees on Social Security and disabled veterans a check for $300 ($600 for couples) if they earned at least $3,000 in 2007 in benefits. However, those on SSI alone did not receive checks. (See SSI and the Tax Rebate Checks)
The Bush Economic Stimulus Package raised loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration. The package was to save businesses $50 billion by allowing them to deduct an extra 50% off of new equipment purchases, and by increasing expense allowances for small businesses. (Source: White House, "New Growth Package Fact Sheet," January 24, 2008; About the 2008 IRS Tax Rebate Checks; WSJ.com, Congress Approves Economic Stimulus Bill, February 8, 2008)
What Were the Pros of the Bush Economic Stimulus Package?:
The Bush Economic Stimulus Package was about 1% of GDP, which advocates said was large enough to impact the $14 trillion economy. Most economists agreed that tax rebates would immediately lift consumer spending, especially if aimed at low-income families who were more likely to spend it than save it. For example, the 2001 rebate checks increased total consumption by 0.8% in the quarter that the checks were received and 0.6% in the subsequent quarter.
The business tax relief gave companies an incentive to expand that year, thereby creating new jobs.
According to estimates by Economy.com, each rebate dollar spent generated $1.19 in additional GDP, while reductions in tax rates produced only 59 cents additional GDP per dollar spent. (Source: IHT, Bush calls for $145 billion stimulus package for economy, January 18, 2008)
What Are the Cons of the Bush Economic Stimulus Package?:
By the time the checks arrived in taxpayers' hands, it was be late summer, too late to impact the first half of the year.
Tax rebates may not be the most efficient way to stimulate the economy. The biggest impact is made by increases in unemployment benefits, which produced about $1.73 in demand for every dollar spent, according to the Economy.com study.
Perhaps most important, the tax cuts weren't balanced by a decrease in government spending. This led to a $500 billion budget deficit. By the time Bush left office, the Federal debt was already $10 trillion. This contributed downward pressure on the dollar, which leads to higher oil prices and inflation over the long run.
