Tax cuts or spending Increases could work more quickly, said Chad Stone, chief economist at the Center on Budget and Policy Prolepses, a think tank that focuses on low- and moderate-income families. But Congress and the White House are only now getting around to such fiscal measures, even though the housing recession and credit crunch have been under way for months. Now, the political pressure to act is rising.
With economic data increasingly pointing to a downturn, voters are getting more worried about a recession. Some 47. 5 percent of those surveyed think a recession is likely in the next year, up from 43. 4 percent in the previous month’s corresponding to a Reuters/Goby poll released on Wednesday. And with the election season Is In full swing, there is no dearth of proposals about what the government could do. Republicans generally favor tax cuts and are trying to steer the discussion to the renewal of Bush administration tax cuts hat are set to expire in 2010.
Democrats have proposed a variety of measures to put money in consumers’ hands, including extended jobless benefits, higher food stamp payments, and aid to cash-strapped states to offset budget cuts. Another possibility is a one-time tax rebate. On Tuesday, the Congressional Budget Office weighed in with a report saying that tax rebates like those paid out to soften the recession of 2001 are among the more cost-effective measures Congress could enact.
The report also said rebates are more effective when given to middle- and lower-income taxpayers who are more likely to spend it, rather than wealthier taxpayers. “When the economy is weak, the key impediment to economic growth is how much demand there Is,” said COB director Peter Razors. “And from that perspective what you want to do Is get money to people who are going to spend It really fast. ” While the along economy might need help right now, It Is not clear how quickly a fiercely dwelled Congress can act.
Any bill would have to work through both the House and Senate an teen go tongue a conference committee Detour approval Day ten went House, which means nothing is likely to take effect until spring. And when the dust settles, it’s not clear these measures will do much to prop up a faltering economy. “For some individuals this could be important,” said Greg Valier, chief political strategist at Stanford Group. “This could help the out them out of a very tight spot. But when you look at the economy as a whole, it’s awfully hard to see in the statistics how this type of stimulus has ever really made much difference