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Government Announces Faster Tax Rebate Checks
Earlier than previously announced, President Bush said tax rebates will start going out Monday, and the money should help Americans cope with rising gasoline and food prices in addition to helping pump cash flow into the poor economy.
Democrats said they were glad the rebate checks were about to go out, but suggested that multinational oil companies were not among the businesses the stimulus package was originally designed to help.
President Bush said: "Starting Monday, the effects of the stimulus will begin to reach millions of households across our country."
Those first rebates will be directly deposited into people's bank accounts. The Internal Revenue Service had been saying direct deposits wouldn't start until next Friday. Bush said paper checks would begin going out on May 9, a week earlier than previously announced.
"The money is going to help Americans offset the high prices we're seeing at the gas pump, the grocery store, and also give our economy a boost to help us pull out of this economic slowdown," Bush said.
Bush's emphasis on fuel and food prices differed from other comments he's made since signing the economic stimulus legislation, intended to aid the economy by boosting overall consumer spending - which accounts for roughly two-thirds of the nation's economic activity.
Bush has suggested the rebates could trigger a spending spree. "When the money reaches the American people, we expect they will use it to boost consumer spending," he said last month.
By saying expressly that people could use these one-time checks to pay for such necessities as food and gas, Bush underscored the deepening challenges facing the economy.
Democrats were quick to pick up on the change of focus.
"It's galling to think that taxpayers' stimulus checks will be lining the pockets of OPEC. The sad truth is that the average American family will spend almost their entire stimulus check on higher gas prices this year," said Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee of Congress.
OPEC is the Organization of Petroleum Exporting Countries.
"Unless the administration gets OPEC to increase oil supply, American consumers are going to be in for a scorching summer of $4 gasoline with no relief in sight," Schumer said.
House Speaker Nancy Pelosi, D-Calif., agreed that people "need this rebate to cope with the rising cost of gas and groceries." She said that, while the rebates would help to get the economy moving, there was a need for a second stimulus package "and we have begun some conversation with the administration and Republicans."
As he had earlier in the week, Bush used the word "slowdown" to describe the state of the economy. He has denied that the nation is in a recession, although many economists say it is.
"It's obvious our economy is in a slowdown. But, fortunately, we recognized the signs early and took action," Bush said.
The rebates; up to $600 for an individual and $1,200 for a couple plus an additional $300 for each dependent child, are the centerpiece of the government's $168 billion stimulus package, enacted in February. Roughly 130 million households are expected to get them.
People must file a 2007 income tax return to be eligible for a rebate check. The IRS now says all checks for those who filed tax returns on time are scheduled to be deposited or mailed by July 11.
The economy; burdened by the collapse of home prices, a financial and credit crisis, and now rising energy and food prices, grew at an anemic 0.6 percent in the final three months of last year and is believed to have gotten even weaker in the first three months of this year.
The government will report on the first quarter's performance next week.
With the economy faltering, the nation's unemployment rate has climbed to 5.1 percent, the highest since September 2005, when it suffered from the devastating blows of the Gulf Coast hurricanes. Job losses in the first three months of this year neared the quarter million mark.
Foreclosures have surged to record highs and financial companies have taken multibillion losses on mortgage investments that soured. The situation has sent a tremor through Wall Street and has sent the administration, Congress and presidential contenders looking for ways to provide relief.
Tax Rebate Spending Tips from a Credit Counseling Point of View:
As Money Smart week in Michigan comes to a close, and National Financial Literacy month begins to wind down, counselors at GreenPath Debt Solutions advise consumers to exercise good money management practices when they receive their imminent U.S. Economic Stimulus tax rebate checks beginning next week.
"Everybody's thrilled about receiving unexpected cash right now, but unnecessary spending could lead to a lot of personal finance problems," said Mark Ernst, a GreenPath credit counselor in Farmington Hills, Mich. "Given the state of many families' finances lately, I'd like to see people think about their rebate as a way to overcome financial challenges first; they can stimulate the economy later."
GreenPath counselors suggest consumers prioritize their rebate spending as follows:- Pay off any late utility or housing expenses.
- Pay off credit card balances. Use your refund to pay the highest interest rate obligation. If you can wipe it out completely, even better.
- Set up an emergency loan fund or add to your current one. Your goal is to save enough money to cover three to six months worth of critical expenses.
- Fix up your home. Home remodeling and increasing the value or safety of your home adds to your quality of life.
- Service your car. Make certain you have reliable transportation; don't put off that tune-up or oil change.
- Expand your horizons: Take a course, start an education fund or train for something that will help you get ahead at work or in a new career.
GreenPath has advice for those whose current financial situations do not feature debt or delinquencies, as well
"While, the stimulus package will certainly have a positive impact on some things, like retail sales, it may not actually help bring us out of our current economic environment," said Ernst. "Even if everything is fine in your financial life right now, we urge you to consider the fact that you may have to worry about job loss or budget shortfalls in the future; put that rebate away into an emergency fund the moment it arrives."
Speaker Nancy Pelosi, House Republican Leader John Boehner, and House Majority Leader Steny Hoyer held a news conference in the Capitol. Here are the opening remarks:
"Because Congress has taken swift and bipartisan action on the economy, we were able to observe the fact that this week America's families will be receiving their Recovery Rebate checks.
"In January, we passed economic stimulus legislation with Recovery Rebates for America's families. In February, the President signed the legislation into law.
"Today, we announce the good news that next week, 7.7 million Americans will receive their Recovery Rebates. This is just the beginning.
"For a middle class family of four, that is $1,800, including $300 for each child. If they have more children, then of course, their check would be more.
"By the end of the summer, 130 million American families will receive their rebates to help them make ends meet, and boost our economy.
"American families need these rebates for the rising cost of gas and groceries, and this will help get the economy moving. These checks will not come a moment too soon for families struggling with the economic downturn, that they are a good, strong step.
"The strain of the economic downturn on middle and low income families demands, in my view, a consideration of a second stimulus package and we have begun some conversations with the Administration and the Republicans on that.
"Just as we did with the Recovery Rebates, Congress must work in a bipartisan way to find solutions for the immediate crisis and for a long term economic recovery for America.
"Specifically, we are working on efforts to pass additional sweeping legislation to keep millions of families in their homes, provide relief to millions of unemployed Americans, and reduce the strain on families who are struggling with rising gas and grocery prices.
"These Recovery Rebates are an example of how Congress and work together and what can be accomplished when we work in a bipartisan way.
"In that regard, I'm very honored to be standing here with the distinguished Republican Leader of the House and my colleague, the Democratic Leader, Mr. Hoyer. I'm pleased to yield the floor to Mr. Boehner and acknowledge his leadership as essential in getting this relief to American families."
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