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Q+A-How the $789 billion stimulus plan will unfold

Published 02/12/2009, 04:00 PM
Updated 02/12/2009, 04:08 PM

WASHINGTON, Feb 12 (Reuters) - Following are questions and answers about the $789 billion economic stimulus package and what's ahead for the effort to reverse a deep recession.

Q: The Democratic-controlled U.S. Senate and House of Representatives are expected to pass the measure over the next few days with little Republican support. When will the money flow to taxpayers?

A: The individual and family tax breaks, up to $400 and $800 respectively, will be achieved by employers reducing the amount of taxes they withhold from paychecks. That could be done relatively quickly. Tax experts say within a couple months the adjustments could be made, roughly $8 a week, and the money would likely be spent because it is included in paychecks. Larger rebate checks were issued a year ago to many who used it to pay off debt.

Q: The package has numerous incentives for individuals such as child tax credits and tax breaks for buying a new car or home as well as for businesses like getting bigger deductions for buying new equipment. How quickly will those put money into consumer's hands?

A: Individuals could seek to have those deductions reflected in their paychecks as well. But many may wait until next year for a bigger refund when they file their 2009 tax returns. For the homebuyers' credit, it could be applied to the 2008 tax return, which is due by April 15.

Businesses could capitalize on the deductions and incentives more quickly as they pay their taxes on a quarterly basis, freeing up cash flow for them to invest, but the question remains whether sufficient demand exists to justify the spending.

Q: Some $48 billion was allocated for transportation initiatives. How quickly will those projects get off the ground?

A: The money comes largely in the form of grants to states, which will make the decisions on what projects to fund as well as the timing. Governors are looking largely at initiatives that are "shovel ready" so hiring for the work can begin quickly, but could be delayed by laborious procurement processes.

Q: Who won and lost in the political battle for the package?

A: The jury is out. Democrats managed to push through the package with the backing of only a handful of moderate Republicans, giving them a political victory. But if the package fails to spur the ailing economy, they will bear much of the blame.

The Republicans who opposed it could face a backlash from voters who, according to opinion polls, wanted Congress to act. They could also come out looking good if the mix of spending and tax breaks fails to help the economy.

President Barack Obama, who lobbied hard for the stimulus package, gets an early legislative victory thanks to his fellow Democrats who control both houses of Congress. But his hopes of forging a new, bipartisan approach in Washington took a hit with Republicans opting instead to fight. (Compiled by Jeremy Pelofsky; Editing by Peter Cooney)

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