News & Politics - House passes stimulus bill, moves to Senate

mh67511 · 01-29-2009, 06:06 PM

http://www.nytimes.com/2009/01/29/us...assess.html?em

Quote:

Components of Stimulus Vary in Speed and Efficiency

WASHINGTON — At first, it will trickle into paychecks in small, barely perceptible amounts: perhaps $12 or $13 a week for many American workers, in the form of lower tax withholding.

For the growing ranks of the unemployed, it will be more noticeable: benefit checks due to stop will keep coming, along with an extra $25 a week.

At the grocery store, a family of four on food stamps could find up to $79 more a month on their government-issued debit card.

And far bigger sums will appear, courtesy of Washington, on budget ledgers in state capitals nationwide: billions of dollars for health care, schools and public works.

There is no doubt that the impact of the $819 billion economic stimulus package advanced by President Obama and approved by the House on Wednesday will start to be felt within weeks once the final version becomes law.

But estimating how effective the huge program of tax cuts and spending will be in getting America’s economic engines humming again is a far more complex calculation requiring almost line-by-line scrutiny of the 647-page bill, lawmakers, economists and policy analysts say.

While it may be difficult to predict how well the overall plan will work, it is easier to draw conclusions about its individual components, gauging them against the basic goal of any stimulus: to promote economic activity and create jobs as quickly and efficiently as possible.

Devising any economic stimulus plan is tricky: initiatives that can be carried out relatively fast, like tax cuts, tend to provide less bang for the buck in terms of generating jobs and economic growth, while initiatives likely to spur more robust activity, like public works projects, can take so long to get under way that they arrive too late.

Tax Cuts
The provisions intended to have the swiftest impact are the tax cuts, totaling $275 billion, roughly a third of the package.

Republicans say the cuts are too small, some Democrats say they were ill designed in a vain effort to appease House Republicans, and some economists say both sides are right: that the plan should include more effective tax cuts and more of them, and also address specific problems like the weak housing market.

Mr. Obama’s signature tax cut would provide a credit of up to $500 for individuals and $1,000 for couples. It won praise in an analysis by the Tax Policy Center, a nonpartisan research group, because it could be carried out quickly, by reducing the amount of money withheld from paychecks.

But the same group also criticized it because it would help families earning as much as $150,000 a year, who are more likely to save than spend. (Saving, or paying off debt, might make sense for individual households, but what the economy needs most is for people to spend money, helping stores to sell more, factories to produce more and employers to avoid cutting additional jobs.)

Some experts say adjusting withholding rates could prove complicated, delaying the money. But the White House says the plan would work even better than a lump-sum rebate; some research suggests that rebate checks are more likely to be saved than tax reductions spread out over a length of time.

Even some economists who generally support the stimulus think that the main tax proposal would provide limited economic lift.

“People are going to spend 30, 40 cents on the dollar, so the multiplier is going to be low,” said Adam S. Posen, deputy director of the Peterson Institute of International Economics.

Aid to States
One area where analysts say the bill would be relatively effective is in providing assistance to states, many of which, to comply with balanced-budget requirements, are facing the prospect of steep cuts in jobs and services. Aid to states does not expand economic activity, but it helps prevent cuts that would make the downturn even worse.

An $87 billion provision increasing the federal contribution for Medicaid costs is expected to go a long way to help states close their budget gaps.

But there has been little discussion so far on a proposal by the Senate Republican leader, Mitch McConnell of Kentucky, that aid to states be provided in the form of loans, encouraging them to spend the money wisely and, once the economy rebounds, obligating them to help reduce the national debt.

The bill would also create a $79 billion state fiscal stabilization fund, disbursing half the money in late 2009 and half in late 2010. The Congressional Budget Office has estimated that little of that money would be spent this year.

Infrastructure
The greatest prospect of delay in spending is on infrastructure. The bill provides $30 billion for highway construction and tens of billions more for other transportation projects, water projects, park renovation, military construction; local housing projects and more.

A Congressional Budget Office analysis found that only 64 percent of the bill’s spending would be completed within 19 months, and spending on construction projects was among the slowest.

If the economic recovery is slow, that timing could work out perfectly, giving the economy a jolt just when faster-acting components are wearing off. But if there is a quicker-than-expected rebound, many of those projects could start just in time to compete with renewed private spending.

Then there is the risk that the projects themselves have little or no long-term economic value and simply drive up the budget deficit. Democrats bowed to Republican pressure on Tuesday and stripped from the bill a $200 million provision for National Mall restorations.

Education, Health Care And Alternative Energy
A look at more than $140 billion in the bill’s spending on education finds some that can move quickly — for instance, $13 billion each over two years for Title I schools, which serve impoverished students, and for special education under the Individuals With Disabilities Education Act.

But also included are programs that even under the most optimistic timetable will take longer to complete, like $20 billion for school renovations. These would provide little near-term help for the economy.

Similar scrutiny could be trained on health care and especially on alternative energy programs. Like some of the education spending, a large chunk of health care spending would not start until 2012 or later, when, most experts think, the recession will be over.

Automatic Stabilizers
Unemployment benefits and food stamps are such useful stimulus tools that budget analysts refer to them as “automatic stabilizers.”

They are built into the system, allowing money to flow quickly to people who need it and likely to spend it.

The House bill would spend $20 billion over five years on added food stamps. If the recovery legislation is adopted by mid-February, officials say, the first added food stamps will be delivered in April and nearly all of that aid used that month.

The legislation would also devote roughly $43 billion over two years to extend and increase unemployment benefits. The provision would add as much as 33 weeks of benefits, for states with the highest unemployment rates.

I have very mixed feelings about this stimulus. On one hand I welcome the tax cut, food stamp increases, and extended unemployment benefits, and I certainly want our economy to improve. On the other hand, the cost scares me; our deficit is already going to be massive this year and I fear the long term cost of this plan will be dangerous for our future. I'm also concerned that this has turned into one big government spending spree -- I'm skeptical that many parts of the bill are nothing more that giveaways to pet projects, using the bad economy as an excuse.

In my opinion, the first stimulus was a failure -- hundreds of billions have been released to banks, none of which will say how the money was spent! On top of that you have banks raising credit card interest rates for no reason and lending tighter than ever.

And frankly, when it comes to spending/using money wisely, I trust the goverment less than I trust the banks.

**sunnykerr** · 01-29-2009, 08:54 PM

I guess we're just hoping and praying that the people handling this stimulus package will know how to do their jobs effectively better than the ones who handled the previous stimulus package.

But, yeah, who's gonna pay for it all?

Stacie18 · 01-29-2009, 09:14 PM

Not a fan of the stimulus package, at all. So much for bipartisanship as no Republicans voted for it.

ceilirose · 01-29-2009, 09:30 PM

The cost of the stimulus package is a concern but we've been blowing billions of dollars in Iraq for the last six years and we will never, ever get that back. I have a problem with some politicians complaining about the cost of this package and never bringing up the billions of dollars that have gone unaccounted for in Iraq.

Tax cuts for the rich won't do it. Trickle down economics isn't viable either. I don't know if this will work either but doing the same thing we've been doing for the last eight years isn't going to help.

If no Republicans vote for the stimulus package then so be it. We have to try another way to help to get out of this mess. It's a gamble for both sides.

**sunnykerr** · 01-31-2009, 10:51 AM

I find the Republican opposition to this stimulus bill kinda hilariously two-faced. They're crying foul on the "House Democrats" acting in a partisan manner... and all I can really think is, "Really? You passed all of the bailouts under Bush but this one is the one where, of all things, 'House Democrats' are being partisan, huh? Really?"

vc318 · 02-01-2009, 10:57 AM

I just hope the stimulus package will really help people out this time. The last one was such a joke and came with so many stipulations that barely anyone got the full amount.

**TheAngel** · 02-02-2009, 07:11 AM

My problem is, I don't agree with stimulus packages, but I can't really see a better option. Throwing money at the problem in my opinion, isn't going to fix it. But then what else can be done? If you give big corporations tax cuts without any stipulations, they're going to waste that money just like they've been doing, so that doesn't work. But these stimulus packages have so many silly articles in them that a good portion of money goes to programs that are totally worthless. I also think giving tax cuts to people, especially big ones, is also silly. Because, hey, we've given you this much money, but when it runs out you're still going to be living in a house you can't afford, you're still not going to have a job, and you'll still be spending it just like you were before the recession and getting yourself in the exact same situation. I feel like this is a catch 22 no matter how you look at it. Things are rough, and until we create new jobs, clean up the housing market, and iron out the wrinkles, nothing's going to get better.

**sunnykerr** · 02-02-2009, 06:15 PM

You guys are on the verge of making all of our brains blow up, FYI.

The new code word on all the newscasts is how the new economic policies are moving towards American protectionism, which wouldn't be good for business up North, which (conversely) wouldn't be good for some other American businesses... That NAFTA thing, it's tricky.

But, yeah, I really like Obama and I trust him a heck of a lot more than the previous guy, but it's interesting how, this morning, all the Canadian morning shows were... I don't want to say "souding the alarm," because that sounds alarmist... let's just say "mentionning the heck out of" the fact that new legislations down South are leaning towards protectionism.

bychance · 02-02-2009, 11:11 PM

Quote:

Originally Posted by Stacie18 (View Post)

Not a fan of the stimulus package, at all. So much for bipartisanship as no Republicans voted for it.

I had a feeling they wouldn't, however I didn't think all of them would.

cookiely · 02-03-2009, 09:03 AM

I don`t know if it consoles you guys but even though Bush had some huge budget
deficits the last couple of years and there have been big bailout/stimuli packages
since the crisis has started, the US public debt is on an avarage level (compared to international standards).

And at least you guys will get tax cuts. Something I haven`t seen in years.
And I propably won`t see in the coming years since politicians seem to think
that people won`t be spending the money anyway.

That's what you get for having an ASP of over 10%

I doubt that Obama will turn to protectionism, That would drag down the economy even more.

ceilirose · 02-03-2009, 10:22 AM

Tax cuts really haven't done anything though. Other than help to create huge deficits they haven't created the jobs that were promised. Well they never do but that's another story.

The protectionism issue is tricky but for me it's more the idea that any jobs aren't outsourced to India, the Philippines etc. The thought of centralizing medical records into one database needs to be done in Iowa City or Omaha or wherever. Over the weekend there was a report that some of the banks who accepted bailout money also requested work visas for foreign nationals. The jobs were high paying for the most part. That kind of stuff - when so many Americans are out of a job and just hanging on - doesn't go over too well.

Also Obama will hit all the major US media outlets today discussing his plan. He's right in that the Republicans have done a very good joy in framing the argument that the bill is mostly pork. He needs to be more pro-active about it.

**sunnykerr** · 02-04-2009, 07:10 PM

Quote:

Originally Posted by ceilirose (View Post)

The protectionism issue is tricky but for me it's more the idea that any jobs aren't outsourced to India, the Philippines etc. The thought of centralizing medical records into one database needs to be done in Iowa City or Omaha or wherever. Over the weekend there was a report that some of the banks who accepted bailout money also requested work visas for foreign nationals. The jobs were high paying for the most part. That kind of stuff - when so many Americans are out of a job and just hanging on - doesn't go over too well.

I think you hit the nail on the head for me. I think that, over the long term, protectionism would be harmful to the U.S. economy. Because, as soon as the U.S. starts "turning inwards," as it were, you know other countries are gonna do the same thing.

And, I'm nowhere near an expert on these matters, but it seems to me that we've moved into a world where we are a bit interdependent. To the point where, if it becomes a domino effect, it might become a problem for us all, including our esteemed neighbours to the south.

At the same time, times are rough, so I can see why international economic cooperations -- in terms of jobs -- are on the list of things that can go. I totally get it.

But it does worry me.

vc318 · 02-05-2009, 07:03 PM

Obama eyes action as parties try to cut stimulus - White House- msnbc.com

Republicans don't want to bend on this so it seems that the stimulus bill is a go.

**sunnykerr** · 02-06-2009, 06:36 PM

I thought Republicans were opposing the stimulus bill...


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