Clock ticking on stimulus cash

WASHINGTON — As Congress and the White House craft an economic stimulus package, there's growing concern that it can't be enacted and implemented quickly enough to forestall a recession.

President Bush is calling for an estimated $150 billion stimulus package that includes one-time tax rebates to spur immediate spending and tax breaks for businesses to spur investment. Democrats want additional measures, including more money for Medicaid, extended unemployment insurance, increased food-stamp benefits and higher Social Security payments.

In a report outlining several stimulus proposals, the Congressional Budget Office said that the most effective policies boost economic activity as much as possible and as fast as possible.

"If the policies do not generate additional spending when the economy is in a phase of very slow growth or a recession, they will provide little help to the economy when it is needed," the report concluded.

Both sides have pledged to work quickly to enact a package, but even if they succeed, getting the cash out of the federal bureaucracy won't be easy.

The Internal Revenue Service has begun processing 2007 tax returns, and it's reprogramming its computers to comply with changes in tax law that Congress passed late last year, which means the IRS probably couldn't begin mailing rebate checks before late spring. Short-term payroll-tax holidays would be even harder for the IRS to process quickly.

It would take the Social Security Administration, which has an outdated computer system, at least six weeks to begin distributing additional money to retirees. And new federal public works or other projects designed to stimulate the economy generally "require years of planning and preparation," the CBO said.

It's not clear, then, whether the federal government can act fast enough to prevent or even cushion a recession.

While the proposed tax rebates echo what the IRS did in 2001, those checks were issued after the bulk of income-tax filings had been processed.

This time, the tax-filing season has just begun.

"Obviously, we're recognizing the fact that we're in the current filing season," said Andrew DeSouza, a Treasury spokesman.

To further complicate matters, the IRS is reprogramming its computers to comply with the alternative minimum tax legislation that Congress passed late last year. The new law, a temporary one-year fix, has forced up to 13.5 million taxpayers to wait until mid-February to submit their returns.

Those late returns will keep the IRS busy, meaning any new tax-rebate checks wouldn't start being mailed until May or June, when most of the other returns have been completed, said CBO Director Peter Orszag.

The process would take eight to 10 weeks, Orszag said, so some consumers wouldn't get their rebate checks until late summer.

Whether that will be too late to head off a recession is uncertain.

House Democrats are trying to get a measure passed during the first week of February. It would then go to the Senate and have time to get to Bush before the Presidents Day break.

The parameters of the plan have solidified in recent days, and both parties have agreed informally to include a rebate package, increased food-stamp benefits, extended unemployment insurance and business depreciations.

Leaders near deal

House Democratic and Republican leaders appeared close to agreement with the White House on a reworked package of emergency tax cuts to jolt the economy.

House Speaker Nancy Pelosi, D-Calif., made major concessions late Wednesday to drop increases in food-stamp and unemployment benefits in exchange for tax rebates of at least $300 for all people earning a paycheck, including low-income earners who make too little to pay income taxes. Families with children would receive an additional $300 a child, while those paying income taxes could receive higher rebates, a senior House aide said.