Mich. may benefit from urgent need to fend off a recession in U.S.

Mich. may benefit from urgent need to fend off a recession in U.S. January 22, 2008 By TODD SPANGLER FREE PRESS WASHINGTON STAFF WASHINGTON – With the White House and Congress primed to prop up a sagging national economy, Michiganders struggling with joblessness, plant closures and falling home values could be on the receiving end of targeted relief measures lawmakers began bandying about today. During an eventful day that saw a key interest rate trimmed by three-quarters of a percentage point and President George W. Bush summon Democratic and Republican leaders of Congress to huddle on the economy, the head of the Congressional Budget Office told a Senate committee Tuesday that tax rebates may move too slowly to be effective. AdvertisementInstead, measures including an extension of unemployment benefits and increased availability of food stamps may provide more immediate relief for the economy, CBO Director Peter Orszag told the Senate Finance Committee. Those are also moves that could specifically aid Michigan – and other states where the still-threatening recession has apparently already taken hold. Aiding those states, where people lack money and are ready to spend, not save, could have the deepest impact on the economy. “He was really targeting states that have economic problems like Michigan and individuals who have lost their jobs,” said Sen. Debbie Stabenow, a Michigan Democrat who serves on the committee. Stabenow and some other members of Michigan’s delegation want Congress to consider a host of alternatives and state officials are pushing their own agenda, with the nation’s governors expected to reach some sort of consensus as well. For Michigan, the key ingredients are expanded unemployment benefits, not to mention additional help paying Medicaid costs – two items that could be of particular help in a state with high joblessness like Michigan, where the 7.6% unemployment rate in December led the nation. There is no doubt that, in an election year, the nation’s financial woes are going to get plenty of attention and that competition between relief measures will be fierce. Already, there has been talk of limiting tax rebates to individuals and families who pay taxes – not earners making so little they avoid federal taxes. On the other hand, experts say those lower income earners are more likely to spend and therefore push the economy. “The more you target lower income families, the bigger the bang you get for your buck,” said Orszag, whose agency provides nonpartisan analysis to Congress. Michigan’s economic troubles, to be sure, are not the driving concern behind the sudden moves by the Bush administration and Congress to address the economy. A national economy that appears to be on the brink of recession – fueled in part by a national housing crisis felt for years now in Michigan – has resulted in worries of a global slowdown and battling programs for spurring U.S. markets. One measure mentioned on several fronts has been tax rebate checks – one report suggests Bush could propose as much as $800 for an individual and $1,600 for a family. And, on Tuesday, Senate Finance Committee Max Baucus, a Montana Democrat, suggested rebates of $400 per person, including children – a proposal which would help families. In a presidential election year, those could prove tempting choices. But Orszag said that while such a program would most likely help the economy, the reality is that it would take months to issue those checks, with the first not going out until May. That could help create spending in the second half of the year – not the first, when it’s needed. And if the economy has found its footing by then, the checks could serve to push prices higher as the market is flush with cash, he said. More effective measures would come “the sooner, the better,” said Orszag, “and the more that can be delivered during the first half of 2008, the better.” In Michigan, money to extend unemployment benefits would help people whose benefits have already run out or soon will. Typically an out-of-work individual can’t collect benefits more than 26 weeks a year. About 383,000 people were unemployed in Michigan in December. Stabenow also said there might be other ways of putting money in people’s pockets more directly, perhaps by having the government pick up payroll taxes such as Social Security withholding. Rep. Candice Miller, a Harrison Township Republican, said she believes tax rebates aimed at lower- and middle-income wage earners will spark the economy and is also in favor of extending unemployment benefits and other moves. She’d also like to see more money freed up for bridges and roads. She knows it’s not being done specifically for Michigan and “we have to take what we can get.” “But what we can get is pretty good,” she said. Miller added that she’s been pushing for years to get unemployment benefits extended for people in need, and she’d get the response from other members of her party on Capitol Hill, “For who?” “You’d try to explain to them how bad it was in Michigan,” she said.