Every time a recession looms or the economy begins to slow down, the government seeks to restore the economy through different stimulus plans. The 2008 recession was one of those cases. When the mortgage crisis hit the economy, causing widespread panic with the sudden financial crash, the government took immediate steps to stimulate the economy back to normal and restore confidence in the economic market. President Bush signed the Economic Stimulus Act of 2008, which provided low- and middle-income taxpayers with a stimulus rebate check of $ 300.00 for qualifying children and $ 600.00 for adults. Any qualified taxpayer who did not receive the stimulus check was allowed to offset the stimulus amount against outstanding tax liabilities.
The intention of the stimulus control was to induce spending in the economy in the hope of reviving it. Since people with lower and middle class incomes were expected to spend the funds received on goods and services, economists projected that they were the best bet for reviving a stagnant economy. Higher spending would mean increased demand, generating growth in the industry and, by extension, creating jobs. However, the expected impact of the stimulus controls did not result in significant economic growth, but instead produced a public deficit of $ 165.9 billion.
There were mixed reactions and proposals on how to solve the new crisis that had been created (the resulting deficit problem). The economy was slowing again and the government had to take action again and quickly. Ben Bernanke, chairman of the Federal Reserve, warned that a second stimulus plan could be appropriate to keep the economy going. However, lawmakers were divided on the stimulus plan and others suggested tax cuts.
Finally, there was no second stimulus check in 2008, as many anticipated. When the Obama administration took over the White House, they established several stimulus programs under the American Recovery and Reinvestment Act (ARRA) of 2009. Under the stimulus package, the recipients of the stimulus checks were retired citizens and disabled people, who received $ 250.00. In addition to the return checks for this group of qualified individuals, the ARRA opted for tax exemptions for the rest of the taxpayers. The tax credit to make work profitable has been extended to low- and middle-income people. Individuals who qualified received a credit of $ 400.00 and married couples who applied jointly received a credit of $ 800.00. The credit that was established to last until 2009 and 2010 expired and was replaced by the 2010 Payroll Tax Credit.
Under the Payroll Tax Credit, the Social Security tax was reduced from 6.2% to 4.2% with a cap of $ 106,800.00. In addition to the introduction of the Payroll Tax Credit, Congress decided to extend the Bush tax cuts that were due to expire in 2010 for two more years (until 2012).
However, in May 2011, a report on employment and unemployment showed that economic progress was not approaching as expected. Recent reports also indicate that the manufacturing sector is declining and the Federal Reserve Report for May 2011 also offers disappointing figures. There are high expectations that the government will develop additional stimulus packages, including another stimulus check distribution plan, to try to further jump-start the economy. However, the anticipation of a stimulus package is now challenged by the public deficit. For now, economists, tax experts, and the general public can only wait and see what remedy the government will put into trying to resolve the situation.
