Stimulus package

Only an issue as politically perilous as the economy could bring President Bush and the Democratic Congress together this quickly. The talk in Washington no longer focuses on the necessity of an economic stimulus bill, but on its inevitability — Sen. Charles Schumer, D-N.Y., chairman of the congressional Joint Economic Committee, says legislation could become law as soon as March 1.

The package’s lone policy certainty amid sliding stock markets, rising unemployment and shaky consumer confidence: some form of direct compensation — euphemistically called a “rebate” — to taxpayers. Consumer spending accounts for about 70 percent of the U.S. economy, and Republicans and Democrats are joined in the belief that billions of dollars worth of checks would provide enough of a fiscal jolt to temper or even prevent a recession.

Whether these checks will meet the dictionary definition of a “rebate” — and whether they’ll work as intended — is unsettled.

President Bush wants one-time income tax rebates, similar to the ones he pushed through Congress in 2001. The White House won’t reveal how big the rebates might run, but congressional aides have said the president envisions $800 checks for individual filers and $1,600 for married couples.

Democrats, meanwhile, want rebates directed to the poor, arguing that lower-income households are more likely to spend the money immediately. But the poorest 40 percent of U.S. households don’t pay income taxes. In fact, many of them already receive subsidies from the federal government through the earned income tax credit.

A rebate is a return of an amount already paid. Returning money to people who never paid it in the first place isn’t a rebate — it’s welfare.

So Democrats have turned their attention to Social Security and Medicare payroll deductions. Linking $500 rebates to these taxes would allow the inclusion of low-income workers, never mind that both entitlements are careening toward insolvency.

And to keep the bill’s cost down — and Congress’ discretionary spending up — some Democrats want middle- and upper-income households excluded from the legislation altogether. Congressional aides who spoke with The Associated Press on the condition of anonymity said the rebates could be limited to individuals with incomes $85,000 or less and couples making $110,000 or less.

This isn’t an economic stimulus. This is just another redistribution scheme, perfectly timed to buy votes in November’s election.

Regardless of which way Congress and President Bush decide to go on the “rebate” front, the checks will be of little help to the economy without correlating cuts in federal spending. Even if taxpayers choose to save or invest their windfalls, whatever interest they might gain would be offset by the interest they’ll owe on the federal budget deficit and the growing national debt.

Allowing people to keep more of their own money is a good idea. But income tax cuts that would improve workers’ take-home pay in the years ahead would be a far stronger approach than passing out welfare checks disguised as “rebates.” The economy would recover far more quickly if Congress made President Bush’s income tax cuts permanent, rather than let them expire in 2011. Right now, congressional Democrats seem willing to cede income tax relief only for middle-class families, along with some business tax cuts.

Congress and President Bush certainly will feel good about themselves if they can get a deal done in the next month. But they’re on the wrong track if they want to make workers and investors feel good about the economy again.