economy booster

what's up

With economists, Wall Street and Americans increasingly leery a recession was on the horizon, DC hustled to put a "stimulus" plan in place to give the economy a little pre-emptive boost in early '08. Congress followed up with a second, mini-stimulus - really just extending unemployment benefits (as part of a war funding bill - WP) - in June '08 and then tossed in another extension for benefits in November. Other measures to shore up the economy - by tossing life lines to homeowners and financial institutions - followed later in the year.

In 09, with worries a recession could become that "d" word, Congress patched together a second - mammoth - stimulus package it passed mid-February.

The president-elect's economic team was first to propose the outlines of a $800 billion stimulus that would create 3 billion jobs over the next few years by pumping money into infrastructure projects (schools, sewers, high-speed internet, you name it), state aid for health care (Medicaid, SCHIP, IT investment), middle class tax breaks and green energy initiatives. (This WaPo article explains Obama's math on getting to 3 million jobs.) The House crafted its bill largely on Obama's model, passing it in late January, 2009 (WP). The Senate okayed its version February 10th, with significant shifts in priorities. Nonetheless both houses whipped out a compromise bill in record time, letting Obama lend his signature on February 17.

The 09 Stimulus Bill

The 09 recovery bill is a mammoth patchwork of tax cuts, aid for states, individual assistance and money for infrastructure projects. (Numbers mostly taken from this pretty comprehensive NYT article.)

$233 billion in tax cuts include:

  • up to $400 for individuals (making less than $75,000) and $800 for families (under $150,000), at a cost of $116 billion
  • $70 billion to extend the middle class exemption from the Alternative Minimu Tax (which usually gets passed each year, anyway)
  • $14 billion for expanded child tax credits
  • $14 billion for college tax credits
  • $23 billion for states to back investments in school construction and poor communities
  • $14 billion in tax incentives for renewable energy
  • $10 billion for business

$500 billion in spending include:

  • $87 billion to cover states' Medicaid costs
  • $25 billion to help the newly unemployed pay for healthcare through COBRA 
  • $36 billion to expand unemployment benefits (NYT)
  • $17 billion to get health records computerized
  • $54 billion in "stabilization" funds for states to cover education costs (plus billions more to support education programs - WP)
  • $48 billion for transportation projects
  • $44 billion for energy projects
  • $20 billion for food stamps
  • $41 billion for other infrastructure projects

Patching a Stimulus - or "Recovery" - Bill Together

Team Obama's Plan

President-elect Obama did a lot of heavy hinting about what he'd put in a stimulus plan, he waited until after the inauguration to detail his plan.

$320 billion in tax cuts, including:

  • $200 billion in credits for singles ($500) and families ($1,000) with less than $200,000 in income
  • $100 billion for businesses
  • $20-$25 billion in - mostly green - energy tax incentives (WP)
  • some lawmakers would also like to include a one or two year extension of middle class cover from the AMT tax (WP)

$480 billion in spending, possibly including

  • $50 billion for transportation projects
  • billions more for other infrastructure projects
  • extended unemployment benefits, even for part-time workers
  • $87 billion for states to help pay for Medicaid and $80 billion for education costs
  • investment in a national electricity grid to support greater green energy (among other alternative energy projects)
  • greater funding for school construction, services for students with special needs, Head Start programs and college tuition

(Also see WP, WP, NYT, NYT, WP, NYT, WP, WP, WP, WP, WP, WP, NYT, NYT, for the run up to the plan)

The House Plan

The bill passed by the House in late January includes:

$550 billion in spending, including:

  • $52 billion for school programs and construction, $54 billion to "stabilize" state education funding and $16 billion to cover an increase in Pell Grants
  • $32 billion to boost green energy, including a national grid, and $22 billion for energy conservation
  • an increase in employment checks by $25
  • $10 billion for science research
  • $6 billion to increase high speed internet access
  • $20 billion to modernize medical records (NYT)
  • $40 billion in highway  and transit projects and $31 billion for other public infrastructure upgrades
  • $87 billion to help states pay for Medicaid 
  • $39 billion-ish in extra aid to states to pay for temporary expanded Medicaid coverage (for laid off workers) as well as to help other excessed workers pay for COBRA (WP, NYT)
  • $20 billion for increases in food stamp benefits

$275 billion in tax cuts, including:

  • $500 tax credit for singles making less than $75,000 and $1000 for families under $150,000, costing $145 billion
  • $32 billion in child and college tax credits
  • $41 billion in tax write-offs for businesses' capital investments
  • $20 billion in green energy tax credits

The numbers above are from Congress Daily a couple of dailies - WP, WP - for the hard core number crunching see this CBO pdf. Also check out this NYTimes analysis of if, when and how the bill's components will give the economy a boost.

The Senate Plan

The Senate bill supposedly started off looking a lot like the House bill, although it added on $70 billion by including an extension of a middle class exemption from the Alternative Minimum Tax - but push back from moderate Dems and Republicans have cut out about $100 billion in funding for projects not deemed to have an immediate stimulating effect. A group of those centrists hatched a compromise package that the chamber plans to vote on the week of February 9.

Included in the Senate's compromise bill (from the appropriation committee's summary, WP, WP, NYT)

  • $116 billion in infrastructure and science spending
  • $88 billion for education and training
  • $40 billion for energy projects
  • $23 billion in nutrition and other programs for low income families
  • $14 billion for health programs
  • a $15,000 tax credit for new homebuyers for a total cost of $35 billion (which passed as an amendment, but could end up getting nixed again. The House bill had a much smaller - $3b in new homeowner tax incentives)
  • a $1,500 tax credit for buying an American car (also passed as an amendment, but high on the nix list)
  • a $300 check for retirees and disabled at a $17 billion pricetag
  • a "buy American" requirement (which senators modified through an amendment to make sure it doesn't violate any trade treaties)

Senators cut a number of costs out of the House version, including:

  • $40 billion in support for states to stabilize funding, particularly for schools and health care
  • $20 billion for school and college construction
  • $5 billion from COBRA subsidies for the unemployed
  • $2 billion to get hospitals using computerized records
  • $2 billion to expand broadband access (down to $7 billion)
  • about half of an $18 billion refundable tax credit for child care


Updated January 31, 2009

Posted In

Kade M for "economy booster"

Republicans, opposing the payday loan being made to help with economic recovery, opposed the economic stimulus package from the President. Even after he extended an olive branch to them to work with them, talking with the entire Republican convention, they still opposed it outright, contending that they wanted stimulus package amendments to include more tax cuts. Like a payday loan overriding a sudden expense, the package is expected to pass despite unanimous Republican opposition. The Senate will vote on the bill next, and hopefully the economy will get the payday loan that it needs.

KadeM | February 5, 2009 - 6:14am

Many Ameriacan lost

Many Ameriacan lost Millions of Dollars in the Stock Market in 2008 and company stcoks are beaten down.

Current Tax law allows write off of losses only against gains.

Why not change the tax law to allow write off of 2008 losses against 2008 taxes due.  This would help not only individuals but companies that have bought back stock at higher prices than current?

a random Joe (not verified) | January 17, 2009 - 12:58pm

I think it is unfortunate!

I think it is unfortunate for folks to count on eggs before they hatch, but
I see it at my work. People are counting on the stimulus to come
through. I however think this is foolish move on the government’s part; since it is giving rational to people to continue spinning the cog of consumerism instead of holding back and saving. I feel the greatest damage to our society is consumerism and the unfortunate thought that credit is
a good thing. It is about as short sighted as it was for Congress to borrow money from Social Security.

Not to jack the blog, but I really believe our greatest problem is a secondary effect of rising fuel costs;
rising fuel costs are causing too much inflation of prices. I
have been watching things closely and the rising cost of food, because farmers are switching to corn to produce ethanol is having a great affect on the market. I am all for capitalism, but I think oil needs to be regulated a
little better.

joe.corner | April 14, 2008 - 4:18pm

I dont know the best plan

I dont know the best plan sounds like what the Senate and Democratic are saying

a random Joe (not verified) | February 19, 2008 - 5:02pm

rebate

we will see in the remaining months as to regards to this alleged rebate from the feds

I think it is far fetched and a fantasy cooked up to try and bribe the taxpayer, into spending more money with the hopes "the check is in the mail" oh goodie lets go buy the bigscreen now because the rebate check will be here in june..... WAKE UP PEOPLE IT AINT GONNA HAPPEN, this stupid [edit from cJ sanitation police] government will never do anything for its citizens unless it benefits them, how is this benefitting them? a proposed rebate does nothing but stir and lure consumers into a false sense of security, The feds benefit by more taxes being paid and more money for them and a big [scrub, scrub] YOU to the american people,whilst the government is laughing all the way to the federal reserve

[deleted gratuitous bush bashing]!!!!!

a random Joe (not verified) | January 29, 2008 - 10:21am
talker's picture

some truth

Random - I'm with you when you suggest that our politicians are keen on the political points they'll get from passing a stimulus package and when you say that a stimulus package may be more about the psychological effect on consumers and the market than on any real "boost" - but a couple of points where I think you're off:

First, the rebate really is coming - it may not arrive til May or June, but Congress and the prez are set on this happening and it's doubtful it will get derailed.

Second, while economists may not agree on the need or merits of an economic stimulus, this is not just a plan cooked up by politicians - a fair amount of economists (probably the majority) think that a stimulus is needed to help our economy from dipping into a recession.

Finally, the only one who's getting cash are the 100+ million families who will get checks (about $100 billion) and the businesses that'll get tax breaks (another $50 billion) - the IRS may have to get a little cash to help process the millions of checks and new tax forms, but - believe me - my guess is that the IRS would rather pass on the cash and not bother with the whole mess. Taxes won't be raised; instead, the money will be borrowed. Taxes may be raised on future generations to pay for the debt, but that's another matter.

talker | January 29, 2008 - 1:49pm