Bush calls for $145 billion in tax relief

January 18, 2008 11:14:24 PM PST
The president has a plan to shore up the economy and fend off a recession. In all, the president is calling for a stimulus plan in the neighborhood of $150 billion including tax incentives for business to re-invest and tax relief for everyone to spend at the mall. At least, that's the hope.

In a year of partisan politics, there is unanimous agreement that the best way to kick start the economy is to put money in the hands of consumers to spend. The economy isn't in a tailspin, but growth is sluggish and economists agree that it's better to do something now.

Friday afternoon, President Bush used a small manufacturing plant outside of Washington to demonstrate the vitality of the U.S. economy. However, earlier in the day, Mr. Bush acknowledged the risk of recession and embraced nearly $150 billion worth of tax relief.

"This growth package must be big enough to make a difference in an economy as large and dynamic as ours," said President Bush.

The White House and Congress are scrambling to act as fears mount that the housing slump and credit crisis could force the world's largest economy into its first recession since 2001.

President Bush insisted a stimulus package must be built on broad-based tax relief, must be temporary, must take effect right away, and must not include any tax increases.

One idea being floated are rebate checks of $800 for individuals and $1,600 for couples. The goal is to spend that money and stimulate the economy.

U.C. Berkeley labor economist, Harley Shaiken, says it's likely the rebates would go to lower income taxpayers for the greatest impact.

"If you earn $40,000 a year and that check comes in, it's likely you're going to be spending it and that's going to stimulate the economy. If you earn $200,000 a year, it may go into savings, it may go into something that has a bit more of a lag," says Shaiken.

Latrice Carpenter of Pittsburg knows how she would spend her rebate.

"Housing, food... the necessities I would need getting back and forth to work," says Carpenter.

There is also discussion of tax breaks to businesses to encourage expansion and hiring. However, economists say that would not yield results as quick as putting money in the hands of consumers.

It's not clear where the $150 billion will come from. To put things in perspective, $150 billion is 10 times more than the government spends per month on Afghanistan, Iraq and the war on terror combined.