by Tom Koecke

Created on: March 06, 2008

On February 13, 2008, President Bush signed into law the $168 billion bi-partisan economic stimulus package sent to him by Congress. One part of the three-part package will give tax rebate checks ranging from $300 to $600 per taxpayer, plus $300 for each dependent child in the household. The rebates are limited to individuals with adjusted gross incomes of less than $75,000, and married couples with adjusted gross incomes of less than $150,000. The purpose for the tax rebate is to ease stress on consumers, and to encourage spending.

The second part of the package includes tax incentives for businesses to expand and invest in equipment. It is hoped that giving businesses these incentives will result in employment, further spurring spending and growth.

The third part of the package increases the limits of mortgages that conform to federal guaranty standards.

Many Congressional Democrats also wanted an extension of unemployment benefits and an increase in food stamps, but agreed to the much smaller package. In exchange, Congressional Republicans agreed to include all workers who earned at least $3,000 in 2007, which includes many who have not qualified for previous tax rebates.

Though not technically in recession, economic growth is estimated to be at less than 1%. President Bush believes the package is sufficient to encourage spending to keep the economy from recession. The rebates will help struggling homeowners comply with relaxed standards in the mortgage market, and encourage spending by those not struggling with their payments by keeping tight budgets.

Congressional Democrats supported the bill, but intend to blame President Bush and the Republicans if the plan fails. Republicans are hopeful that the stimulus package coupled with Fed Chairman Ben Bernanke's strategy of promoting economic growth by keeping interest rates low will keep voters confident that the economy is sound. John McCain would then have that in his arsenal for his run at the White House.

That is the hype.

Here is the truth:

The American economy is in shambles. President Bush says the American economy is going through a "rough patch" right now, as it has in the past. The problem is that all these patchwork repairs undermine the integrity of the economy, which periodically corrects itself through recessional periods.

On a basic level, when the stock market is strong, money moves from savings accounts to the market. The reduction in supply of money in banks will cause interest rates to rise. The increase

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