The Bush Administration sent the $168 billion Economic Stimulus Package to Congress, who approved it in 2008. It eliminated taxes on the first $6,000 of taxable income for individuals and the first $12,000 of income for couples. A rebate check was 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 rebate amounts were reduced for individuals with incomes over $75,000 and couples with incomes over $150,000.
The Bush stimulus 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)
It also raised loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration. Unfortunately, this allowed the government-sponsored agencies to take on more toxic debt, and led to Fannie and Freddie's bankruptcy later that year.
The package was intended 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)
The Bush stimulus program totaled 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)
By the time the checks arrived in taxpayers' hands, it was 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.