Rebates not for all students

President George W. Bush signed off on an economic stimulus plan Wednesday that will give tax… President George W. Bush signed off on an economic stimulus plan Wednesday that will give tax rebates to people earning at least $3,000, but the plan excludes many college students – a sector of the population more likely than others to carry out the plan’s goal by quickly spending the rebates meant to lead to a resurgent economy.

John Schmitt, a senior economist for the Center for Economic and Policy Research, said that students are more likely to spend their money directly on goods and services because they live on smaller budgets.

“The people who have the lowest income will spend 100 percent,” Schmitt said.

But the bill’s fine print prevents large numbers of college students from receiving a check. According to Andrew Stoddard, a press adviser for House Speaker Nancy Pelosi, students can only get the rebate if they list themselves as independents on their tax forms.

However, the money isn’t only going to low-income individuals. According to the Congressional Budget Office, individuals earning as much as $75,000 per year are eligible for a rebate between $300 and $600.

The rebate decreases after the $75,000 threshold, but individuals without children who make less than $87,000 will also receive rebates.

Childless couples who file joint tax returns and make less than $150,000 are eligible for rebates between $600 and $1,200. Those making between $150,000 and $174,000 will also receive rebates, albeit small ones. Couples can receive an extra $300 for each dependent aged 17 or younger, provided the child lived with them for the majority of 2007.

The $168 billion Economic Stimulus Act of 2008 gives rebates to people, with the hope that they will spend it on goods and services.

The problem, critics say, is that those with higher incomes are less likely to spend the rebate on goods than debt or investments, which don’t stimulate the economy in the same way.

Sodexho employee John Richardson plans to spend his rebate on his family.

“My one daughter just made honor roll so I’d like to get her a nice outfit or something,” Richardson said.

Pitt College of Business Administration professor Esther Gal-Or, however, doesn’t think enough people will do this to make the plan effective.

“The government hopes that recipients of the rebates will increase consumption in general,” Gal-Or said. “However, in order to pay rebates to some, the government has to tax others. There is no guarantee, therefore, that the package will indeed lead to increased consumption.”

College students who will receive rebates say they will spend the money on anything from tattoos to plane tickets.

Pitt student Erica Marks said she would buy a ticket to Italy. Others will use their money on trips to Ireland or Jamaica.

Other students said they would use their money just to pay their bills or college tuition. Some wonder if this defeats the purpose of the bill, because the money isn’t spent on consumer products.

“It depends on what they do with the money that they were going to spend on tuition anyway,” Schmitt said. “That means that they had $300 to $600 that they were going to give to the University. If they use that to do anything in addition, that would stimulate the economy.”

Some students, like Carnegie Mellon student Mike DeLuca, acknowledge that the rebate, while it may initially be used to pay their bills, will eventually go toward entertainment.

“I’d pay an extra month’s rent, probably so that I can spend money on other stupid nominal things,” DeLuca said.

However, economists say that a real solution to the economic problems requires more than just an increase in spending. The stimulus package may only offer a temporary fix.

Schmitt suggested that legislators will have to meet again in the summer, after taxpayers receive their rebates, to discuss other possible solutions to the problem.

Gal-Or provided insight into what these measures may include.

“I do not think that the country needs this package,” Gal-Or said. “Limiting the role of government in the economy in the form of reduced regulation and lower taxes will be a far more successful way to increase growth.”

The Bush administration passed a similar stimulus plan in 2001, when the economy entered a recession. But some experts are leery of attributing the economic recovery to the stimulus plan.

Schmitt said that the stimulus plan merely shifted problems in the stock market over to the housing sector. In his view today’s recession is the result of problems in the housing sector.

People who were borrowing money against their homes are no longer doing so, and thus have less money to spend on luxuries.

It will be a few months before anyone can tell if this stimulus will be more effective than its predecessor.

Pitt student Tegar Harrington questioned where the money for the rebates is coming from, but he knows for sure where his check will go.

“I’d give it away. I’d split it up among charities and give some to my church,” Harrington said. “It’s not my money to begin with.”