The stimulus package that President Bush and Congress are hammering out could be enough to jumpstart the economy, but don't count on it.
The package is likely to include tax rebates, possibly of $800 for individuals and $1,600 for households, along with tax incentives for businesses to make investments in buying new equipment. The Senate Finance Committee is listening to testimony from the Congressional Budget Office and experts from Harvard University and elsewhere this week on what kinds of ingredients will be needed to get the economy cooking again.
Meanwhile the president has been hunkering down with Treasury Secretary Henry Paulson and other members of his economic team to talk about ways to craft the incentives that will give enough of a jolt to the economy as it increasingly appears to be headed toward recession, if it's not there already.
Will a tax rebate do the trick? Probably not, unless it is tied to a broader program that would help prop up the economy and allow it to recover from the losses tied to the subprime meltdown and the tightening credit market. Those dual crises have hit the bottom lines of banks and financial service giants especially hard with write-downs of ever widening scope.
The stimulus will need to deliver a quick one-two punch if it's going to have enough of an effect on the broader economy and ease the jitters that have affected the world financial markets, which have grown increasingly uncertain about the prospects for the American dollar. The successive rate cuts by the Federal Reserve are bound to have a stimulative effect as well, but they will take time to percolate throughout the economy and avoid the appearance of merely looking like panicky responses.
Accountants will have to look for ways this tax season to help their clients reap the advantages of any tax rebates or tax breaks that come their way while also helping them come up with ways to plan their financial lives to reduce the risks of a recession harming their financial wellbeing. The prospect of a recession will demand prudent advice to help reassure clients about how best to protect themselves.
Of course, economic cycles are beyond the control of even the best-intentioned accountant, which is why the policymakers in Washington are urgently needed to come up with some ideas that will work before the economic outlook gets even bleaker.
