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Experts say use rebate to pay bills

LAWRENCEVILLE - The economic stimulus package that President Bush hopes will revive the economy might largely go toward paying down debt in Gwinnett County.

The one-time tax rebates are at the heart of an agreement forged this week between Bush and Congress that is expected to inject about $150 billion dollars into the lethargic economy. About 117 million families will receive checks for $600 and up, depending on the family's income and number of children.

With 1,809 people drawing unemployment benefits in Gwinnett County, where the jobless rate stands at 4 percent, those dollars might not flow into retail purchases as thickly as politicians hope.

Lawrence Smith, 43, of Lawrenceville, is looking forward to knocking out his "little bills."

"You know how you got kids and the little ones just accumulate, the dentist, old bills. We'll use it to catch those up," Smith said. "It could be good for the economy, depending on how people do their money. People with no bills will just sit on it. If we get it in May, people will probably use it to buy school supplies."

Saving the money might not stimulate the economy, but it's one of the two best uses of the cash, said Anthony Mitchell, spokesman for the Impact Group in Duluth.

"The ideal is that they would use that money to pay down their highest interest rate credit card," Mitchell said. "If they have no debt, they should put it in reserves. The last thing I am going to tell them to do is go out and spend it on a luxury item."

Tracy Shannon, 44, of Loganville, has no luxury spending in mind.

"I'm going to put it toward my car loan," Shannon said.

Nevertheless, a lump sum might be considered a winning lottery ticket to consumers who have tightened their belts for months, said Dr. Roger Tutterow, economics professor at Mercer University.

"Most people will spend to some degree," Tutterow said. "Retail sales have been slower over the last two quarters and the consumer is getting tapped out. In theory, government hopes they will treat it as a windfall and spend."

Where the money comes from

The roughly $150 billion dollars comes from increasing the nation's federal debt obligation, Tutterow said.

"We've seen an improvement on the deficit over the last four to five years as the economy grew stronger and generated tax revenues, but now the economy is slowing and tax revenues are coming in at more modest pace," he said. "It might stimulate the economy, but in the long run we are allowing government to reallocate our resources."

Lawmakers must take care that any stimulus package will benefit the United States and not the economies of overseas nations, said U.S. Sen. Saxby Chambliss, R-Moultrie.

"I will support a plan that makes a real effort to reach those who are struggling the most, and at the same time I want to make certain that we do not implement a plan that will simply stimulate retail sales and support the economies of trading partners," Chambliss said. "We should seek to enact policies that will promote American manufacturing and the small business community."

Steve Landress, 50, of Lilburn, said the plan is not enough.

"It's a waste of tax dollars; it's buying a vote," Landress said, adding that a package to stimulate U.S. job growth would be more helpful. "Everything I'm buying here today is made in China."

Long-term impact

U.S. Sen. Johnny Isakson, R-Marietta, said the nation needs an immediate fix.

"Whatever happens in our economy will largely be determined by how we choose to respond to the current situation," Isakson said. "There are short-term measures Congress can take to make a difference. We need to be focusing on prudent and appropriate steps that will put money back in the pockets of consumers and have an immediate and positive impact on the economy. Then Congress can focus on taking long-term steps to stabilize the economy. This includes reducing the federal deficit, changing our budget process and sticking to spending priorities and pursuing fundamental changes to our tax system."

Dr. Govind Hariharan, chair of the economics, finance and quantitative analysis department at Kennesaw State University's Coles College of Business, said government needs to ride out the economic situation.

"It makes more sense to bear with it than let it go through the system and not come up with these shotgun-type measures," Hariharan said. "What it will do to our debt is a bigger concern to me than what will happen in the short term. The dollar will be valued less because of the size of the national debt."

Hariharan is skeptical that a $600 check will jumpstart a sluggish economy.

"This is a great time to get into the stock market and get something that in longer term will give you a greater return," Hariharan said. "People will be happier when they get the money and there will be some additional spending but I don't see this as a great positive impact."

SideBar: Who benefits

How Americans in different financial situations would fare under the rebate plan proposed by House leaders and the White House.

· An individual with $2,500 in earned income in 2007: Disqualified because income fell below the $3,000 threshold. No rebate.

· A married couple with no children, with adjusted gross income of $100,000 in 2007: Would qualify for the full $1,200 couples. A $1,200 rebate.

· A worker with one child, who earned $9,000 and owed no taxes in 2007: Would qualify for the $300 rebate available to individuals who pay no taxes but earned at least $3,000, plus an additional $300 for the child. A $600 rebate.

· A couple with income of $145,000 in 2007, with three children: Would qualify for the full $1,200 for couples, plus $300 for each child. A $2,100 rebate.

· A couple with income of $160,000 in 2007 with two children: Would qualify for a partial rebate, reduced by $50 for every $1,000 in income above the $150,000 threshold. An $1,800 rebate - $1,200 for the couple plus $300 per child - would go down by $500 for this family. A $1,300 rebate.

· A couple with income of $200,000 and four children: Disqualified because their income exceeded $174,000, the phase-out limit. No rebate.

· An individual with adjusted gross income of $23,000 and no dependents would get a rebate of $600.

· A couple with adjusted gross income of $184,000 and two children would get a $100 rebate.

The Associated Press