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$825 billion economic stimulus package
House Democrats today summarized the much-awaited economic recovery plan, and the total bill now is set at $825 billion. The plan includes $550 billion for spending and state aid. The other $275 billion will come from tax cuts.
House Speaker Nancy Pelosi says the bill will be complete by mid-February. House committees will now review the bill and then it will go to the Senate.
Energy and infrastructure
The package, called the American Recovery and Reinvestment Plan, says $54 billion will be spent on producing alternative energy. Obama wants production of alternative energy in the U.S. to double. Tomorrow Obama will talk about the details at a wind turbine factory in Ohio.
As promised, the bill includes provisions for infrastructure and education. In this plan, $90 billion would go to repairing, modernizing and building roads, bridges, mass transit and waterways. More than $140 billion is allocated for state aid, and most of it would go to education.
Getting the job done
The plan also calls for saving or creating 3 to 4 million jobs. Some estimates say this will be done by 2010, but economists and other members of Obama’s team say it will take two years.
The recovery package also gives aid to those without jobs. $9 billion will go to increasing the amount of unemployment checks. $27 billion would go to extending unemployment benefits. $30.3 billion would subsidize health care for a year for workers who had health coverage through their employers and lost their jobs.
Tax time
Obama’s original plan called for a $3,000-per-hire tax credit for businesses, but the summary released today does not include that provision. It does, however, include what Obama calls the “Make Work Pay” credit, which will provide Americans an extra $500 through decreased paycheck withholding.
Businesses are still up for a tax cut, called the “net operating loss carryback,” but that might not make it onto the final bill. The amount dedicated to this tax cut is unclear. The bill also expands the earned income tax credit.
Republicans respond
The Republican Study committee put forth an alternative bill. Their bill allocates more for business tax cuts. House Minority Leader John Boehner has said that the Democrats’ bill contains questionable spending and doesn’t contain enough tax cuts.
Obama has said that he will look at any and all ideas for stimulus from both parties. With the small amount that would make its way back into individuals’ paychecks, though, many Americans will still be left needing a payday loan in the case of unexpected expenses.
The great debate
There is much talk in Congress as well as households across America as to whether tax cuts or government spending is the best way to stimulate the economy. Economists and politicians agree that there is an urgent need for government intervention to ease the economic crisis, but Democrats and Republicans are sticking to their respective ideals when in comes to what form that intervention should take.
Democrats are pushing to fund government programs that will create jobs. Republicans believe that the money should go to individuals through decreased taxes.
My two cents
There are problems with both theories. Even if the full amount proposed goes to job creation, it will not bring unemployment back down to normal levels, it will simply decrease it. And tax cuts are a risky bet because after all of the financial hardship American families have been through they are saving more, and will likely continue to do so with any extra money they have.
Share your thoughts on which approach you think will get America’s economy back on track.
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Creating new jobs should be one of the top priorities. As a matter of fact, it should be the first priority. How do they expect more money to flow into the economy when there is no money being created? Amid the economic crisis, everyone is cutting down their spending and saving more than ever before. Without employment or a source of income, people will have a harder time saving and contributing goods into the economic system.
We will have to pay it all back. In the end, tax cuts and stimulus packages will only add up to higher taxes for the next generation. The money the government gives away now, it will need back later. Focusing on short term goals such as “boosting the economy” will simply not work in such a complex environment, we should instead invest in schools and alternative energy which will greatly pay back in the long run, as opposed to funding dying businesses and giving money to families that their children will have to pay back years from now.