Obama's Stimulus Package: A U.S. Recovery and Reinvestment Plan

In an effort to provide greater transparency and build bipartisan support for the largest stimulus plan in the nation’s history, President Obama and his team have laid out more details about the $825 Billion Economic Recovery Plan. This plan includes the much anticipated $200 billion plus in consumer stimulus, now in the form of tax rebates, which many families are keenly anticipating. I have written in detail about the makeup of the consumer stimulus (see this post), which basically gives tax breaks - based on income - worth $500 to individuals and $1,000 for couples. This will be paid via adjusting the withholding on people’s paychecks or as a credit when tax returns are filed. It is estimated that 95% of families will benefit from the new tax rebate.

However the consumer stimulus (tax rebates) are only one part of Obama's recovery plan and is more of a short term measure to jump start the economy. In the long term though the focus is to create jobs (3 to 4 million) and upgrade our nations infrastructure and facilities to the 21^st century. Here are some of the other key measures in the economic recovery plan :

• Double within three years the amount of energy that could be produced from renewable resources. That is an ambitious goal, given the 30 years it took to reach current levels. Advisers say that could power 6 million households.
• Upgrade 10,000 schools and improve learning for about 5 million students.
• Build a new electricity grid that lay down more than 3,000 miles of transmission lines to convey this new energy from coast to coast.
• Save taxpayers $2 billion a year by making 75% of federal buildings more energy efficient, and save the average working family $350 on their energy bills by weatherizing 2.5 million homes.
• Computerize the nation’s health record in five years, saving billions of dollars in health care costs and countless lives.
• Repairing and modernizing thousands of miles of America’s roadways and providing new mass transit options for millions of Americans.

The plan would spend at least 75 percent of the total cost, or more than $600 billion, within the first 18 months. Parts of President Obama’s recovery plan have come under heavy criticism from the Republicans who argue that spending is tilted more toward slow moving government and infrastructure spending rather than more aggressive long term tax cuts. However, with the President enjoying huge amounts of support and political capital, it is unlikely the Republicans will have much sway in changing the allocation of funds in the recovery package. As he told them in a meeting with senior senators, “I won [so I get to do what I want]”. House Speaker Nancy Pelosi said that she is committed to having a stimulus bill passed and ready for Obama to sign by the President's Day holiday on Feb. 16.

President Obama is also committed to providing greater transparency and accountability for all the government spending (via a stimulus spend tracking website), one of the key criticisms under the Bush administration. All in all, I think law makers all over the country realize the dire economic straits the nation is facing and the need for action. Time is of essence, or our great grandchildren could still be dealing with the economic fallout. As Obama himself said in his weekly radio address:

In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse….We could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.

Stock position: None.

Comments

[OldLimey:]

Tax rebates are short-term palliatives; give-aways by Bush and Rudd (in Australia) last year had no lasting effect, and kick-started nothing. Further, the article ignores the substantial part of the proposal oriented to filling holes in state and local government operating budgets - the equivalent of a corporation launching a long-term bond to fund this year's wage payments. As for the idea that "Time is of essence, or our great grandchildren could still be dealing with the economic fallout", I suspect they will indeed be dealing with it - in the form of debt.

The article sprinkles fairy-dust on an initiative with an outcome that is at best highly uncertain.

Jan 27 02:11 PM