President Bush signed legislation Wednesday to rush rebates ranging from $300 to $1,200 to millions of people, the centerpiece of government efforts to brace the wobbly economy. First, though, you must file your 2007 tax return.
More than 130 million people are expected to get the rebates, starting around May. Congress, Bush, the Federal Reserve and Wall Street are hoping the money will burn such a hole in people's pockets that they won't be able to resist spending it. And the spending is supposed to give an energizing jolt to a national economy that is in danger of toppling into a recession if it hasn't already.
Whether people actually spend the money remains to be seen. A recent Associated Press-Ipsos poll indicates most people have other plans. Forty-five percent said they planned to pay off bills, while 32 percent said they would save or invest it. Only 19 percent said they would spend their rebates.
The measure Mr. Bush signed a $168 billion rescue package passed with lightning speed by Congress last week includes not only rebates for individuals but also tax breaks for businesses to spur investment in new plants and equipment. That, too, would help bolster U.S. economic activity. The package also contains provisions aimed at helping struggling homeowners clobbered by the housing collapse and the credit crunch refinance into more affordable mortgages.
Flanked by congressional leaders of both parties, Mr. Bush was quick to share the political credit with them for enacting the stimulus bill, reports CBS News White House correspondent Mark Knoller.
The emergency plan marked a rare moment of cooperation among political rivals fearful that an ailing economy during an election year would invite voter retaliation.
Bush, who called the measure "a booster shot for our economy," praised the bipartisan cooperation. "We have come together on a single mission and that is to put the people's interests first," he said.
Who gets a rebate? Most people who pay taxes or earn at least $3,000, including through Social Security or veterans' disability benefits. Singles making more than $75,000 and couples with income topping $150,000, however, will get smaller checks, up to the top limits for any rebate: incomes of $87,000 for individuals and $174,000 for couples.
To get any rebate, you must file a 2007 tax return and have a valid Social Security number. If you already filed your 2007 return, the IRS says you don't need to do anything extra.
Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples, with an additional $300 for each child.
People earning too little to pay taxes but at least $3,000 including elderly people whose only income is from Social Security and veterans who live on disability payments will get $300 if single, or $600 if a couple.
The IRS will send out rebates by mail or by direct deposit into your bank account through the late spring and the summer. The rebates come in addition to any regular tax refund.
To pay for the rebates which are estimated to cost about $117 billion over the next two years the government will have to borrow more money, enlarging the budget deficit.
The Bush administration and some private economists are hopeful the rebates, tax breaks and aggressive interest rate reductions by the Federal Reserve will help the country narrowly dodge a recession. An increasing number of economists, however, believe the country has already fallen into its first recession since 2001, and they are simply hopeful the rescue package will limit the damage. Most people 61 percent say the economy is now in a recession, according to the AP-Ipsos poll.
"I do think this will give the economy a shot of adrenaline," said Stuart Hoffman, chief economist at PNC Financial Services Group.
The National Bureau of Economic Research, a private research organization, looked at what people did with their 2001 rebates. The study found that "households spent about 20 to 40 percent of their rebates on nondurable goods" which can include things like food and clothing in the first three months. They spent roughly another third in the following three months.
With the current stimulus, the economy will log growth in the range of 2.25 percent to 2.50 percent in the second half of this year roughly one full percentage point higher than without the bracing tonic, Hoffman estimated. That would be closer to a more normal rate of around 3 percent, he said.
That in turn should encourage businesses to step up hiring. Nervous employers cut 17,000 jobs in January, the first nationwide loss of jobs in more than four years.
Edward Lazear, chairman of the White House Council of Economic Advisers, predicted, "The stimulus will have the effect of increasing jobs by about half a million above the number that would have been the case in the absence of that."
Still, even with the rescue efforts, some analysts fear the economy could backslide and flirt with recession again in 2009.
To help the severely depressed housing market, the stimulus package would raise temporarily to as high as $729,750 the limit on Federal Housing Administration loans and also raise the cap on loans that mortgage giants Fannie Mae and Freddie Mac can buy.
Raising those limits, should provide relief in the market for "jumbo" mortgages those exceeding $417,000. The credit crunch hit that market hard, making it very difficult, if not impossible, for people to get those loans. That has plunged the housing market even deeper into turmoil.
House Speaker Nancy Pelosi of California said the provisions will provide "families a second chance at the American dream of homeownership by helping them refinance their mortgages and avoid foreclosure."