| Business | September 19, 2008 09:53 AM EST |
| A Second Stimulus |
| This year’s stimulus tax rebates gave a hot little boost to the ailing American economy, but it doesn’t stop the struggle; what’s next? |
| By Luisana Suegart from Markets.com |
Since the spring, the Treasury department has mailed out over $93 billion in tax rebates to Americans, with more on the way for those given an extension to file their returns. Experts say the economic stimulus package accounts for the higher-than-expected growth in GDP and consumer spending during the second quarter, but as the hype wears away and weak economic forecasts loom, many are asking for a second helping.
The Commerce Department revealed a 3.3% growth in GDP for the second quarter. That figure is 1.4% higher than what was anticipated by economic forecasts for the quarter, and was accompanied by a 1.7% growth in consumer spending, even in the face of soaring gas prices and a mortifying unemployment rate. The government developed the program early this year to alleviate the pain inflicted by the credit crunch and housing crisis that have fueled the economic slowdown, but the relief is temporary.
The unemployment rate continues to take more of a tumble, rising to 6.1% after the U.S. Department of Labor reported a net loss of 84,000 jobs during the month of August. It was another number exceeding expectations, yet this time for the worst, and one that is likely to have a ripple effect on anyone tied to the housing sector. In addition, lower gas prices could not stop car sales from taking a nose dive, as they fell by more than 15% since last August.
As the short-lived economic boost dies down, attention has shifted towards round two. In July, the House of Representatives proposed a second stimulus plan worth $50 billion dollars. This time, however, the Democratic majority will stay away from tax rebates and allocate the funds differently. The program focuses on increasing unemployment and food stamp benefits, with additional funding going towards Medicare and highway and school construction. Sen. Barack Obama uncovered his version of the stimulus plan, an extension to the proposal that involves taxing oil companies to fund additional tax rebates worth $500, along with the government aid.
The government spending-intensive program is not backed by the Bush Administration, and is criticized by fiscal conservatives in Congress concerned with the very deep deficit, which is expected to reach $407 billion this year, according to the Congressional Budget Office. While Sen. John McCain has not expressed his approval of the spending plan, he has yet to dismiss the idea.
In addition to a second stimulus plan, automakers are seeking $50 billion in loans to invest in fuel-efficient cars to comply with the higher demand fueled by gas prices, a proposal that is backed by both presidential candidates. Then again, with the presidential elections right around the corner, it seems unlikely that a decision will be reached before Congress resumes in January or before we know who the next president will be.
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