Rebate Checks Alone Won’t Rebuild the Economy

By Blanca Rojas

As millions of Americans receive their tax rebate checks in the mail, the government is waiting to see whether this cash infusion will trigger a mass spending spree. Supporters believe this strategy will create rebate-fueled purchasing power that will give consumers the confidence they need to purchase that new flat-screen TV or simply pay off their overdue bills, jolting the economy back to life in the process.

The problem with this scenario is that no one can predict whether the rebate checks will do the job. Rebate checks are only one piece of the economic recovery equation; Congress must also create a growth package that contains proven initiatives for pulling the country out of a recession. This package should include four things: an expansion of unemployment insurance, a temporary increase in food stamp benefits, increased aid to state and local governments, and investment in infrastructure projects that would immediately put people to work.

There is no question that more and more Georgia families are struggling to meet basic needs. In the past year alone gas prices have soared 20 percent, while food staples such as bread, milk, and eggs have surged at double-digit rates. As of April this year, the number of people seeking food assistance from the Open Door Community House in Columbus, doubled from 300 to 600 over the same period last year.

At the same time, more people are facing unemployment or reduced work hours. In Georgia, unemployment rates rose from 4.2 percent to 5.3 percent between March 2007 and 2008.

With at least 25 states facing a combined estimated budget shortfall of $40 billion for fiscal year 2009, there is little that financially strapped states can do to ease the burden. Georgia’s current budget deficit of $200 to $300 million, according to the most recent figures available from the Center on Budget and Policy Priorities, is already producing harmful cuts in heath care, education, and other vital services.

None of this is likely to be solved by a $1,200 rebate check for a family of three. Any responsible effort to pull the country out of the current recession should start with an expansion of unemployment benefits. The U.S. Department of Labor ranks expanding unemployment compensation as the No. 1 tool for stimulating the economy. Studies show that for every dollar spent on unemployment insurance, anywhere from $1.73 to $2.15 is re-circulated back into the economy.

A temporary increase in food stamp benefits is another quick way to stimulate the economy and assist those in need. The recession has forced more people onto the food stamp rolls, where they receive an average of just $1 per meal. A temporary increase in that allotment could be easily added to food stamp electronic debit cards and spent quickly, boosting the economy while helping to prevent millions of children and seniors from going to bed hungry.

Increasing aid to state and local governments is also imperative to stem job loss and halt further cuts in critical programs and services including Medicaid and SCHIP. Without help, the budget shortfalls confronting states will increase hardships for low-income people and push the country into a deeper recession.

Finally, investing in much-needed infrastructure projects would create jobs, rebuild communities, and strengthen the economy. This is especially true of projects that are already underway but could be accelerated or repaired.

Before the economic downturn, average Americans worked hard but lost ground to rising costs in health care, food, gas and housing. In the midst of the current economic crisis, the Bush Administration has done little to help them get back on their feet, yet it has managed to provide tax breaks to the wealthy, bail out investment banking giants, and spend $12 billion a month on the war in Iraq. It’s time to give a hand to families in need and states facing serious financial crisis. Our elected officials must act now with a recovery package that stimulates the economy by helping those who are hurting most.
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Rojas is the Invest in America’s Future coordinator for the Georgia Rural Urban Summit Affiliate
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Copyright (C) 2008 by the Georgia Forum.