Update: The Final Economic Stimulus Package
It's not a shocker to learn that Congressional Republicans are criticizing President Barack Obama's proposed $825 billion economic stimulus package. And it's not a shocker to think that the package will pass the House on Wednesday, post haste. Things are a little slower in the Senate, Democrats need to persuade a few Republicans to join their cause.
One thing that's troubling to me is that this bill -- like the economic recovery bills that came before it -- is all dressed up with decorative spending. A few million here, a few million there ... proposals that have nothing to do with economic stimulus and everything to do with obtaining support (votes). No, they aren't earmarks, but the effect is the same.
A more troubling part of the package: the payroll tax cuts and Social Security bonus payment. The payroll tax cut is $500 for people who earn less than $75,000 a year, and $1,000 for married couples who earn less than $150,000 a year. The Senate plan includes $300 for Social Security recipients.
Why is this troubling? First, the burden of implementation for the bulk of this economic stimulus is being passed along to America's employers. Millions of employers will be forced implement a payroll change for more than 150 million employees. In most large, medium and small businesses, making those system-wide changes isn't as simple as pushing one button. And has anyone figured out how this will impact self-employed Americans?
Second, an incremental change in payroll taxes is not going to stimulate anyone to run out and "consume" -- it's less than $10 a week. So unless this is a one-time thing (and the logistics of that seem improbable), how will we "feel" like we have extra money to spend, assuming that said spending would "stimulate" the economy?
Finally, it's troubling because these sorts of "stimulus" plans don't work. It didn't work for George Bush in 2001 and it certainly didn't in 2008.
The good news with the bill is there is a focus on infrastructure.
This is good news because we've ignored our infrastructure for far too long. However, the problem with infrastructure spending is that it only works as a stimulus if we can fund green-light projects that are ready to start immediately. Most infrastructure projects require planning, which means no jump-start effect on the economy. And most of what appears on the President's "recovery plan metrics" (pdf) are not projects ready to move immediately off the drawing board.
My grim assessment is born out by Congressional Budget Office analysis. CBO estimates that only 7 percent of infrastructure money would be buying goods and services by the end of the year, and only 38 percent by the end of the 2010 fiscal year (September 2010). CBO is talking about money that is changing hands, not money allocated ("spent") on a budget sheet.
This is not to say that I think those things on the list are bad or shouldn't be considered. In fact, I think all the money the Democrats want to give to people who have a job (like me) should instead be allocated to infrastructure projects like these that create jobs, even if those jobs won't come about until 2010 or 2011.
Finally, I'm arguing for no new tax cuts either, at the top or the bottom. Like the $500 payroll tax cut, the effect of a tax cut is incremental and, in the main, marginal. And people won't realize it until 2010.
So call your Congress critters. It probably won't change any minds, but they should hear from you anyway. Even if you disagree with me!
This is probably a good time to review how much is a billion and how much is a trillion. For example, a million seconds is 11.5 days. A billion seconds is 32 years. A trillion seconds is 32,000 years. And the Obama stimulus package will cost almost a trillion dollars.
Update: my initial nalysis of HR 1 (Review The "Emergency" Economic Stimulus Bill); tip to WSB Radio.
Comments
And what about us that fall in the category that make more than $75,000 and single? I will get exactly what I got under the Bush plan….a whopping $15.00…..i can’t even fill my gas tank for that!!
in reply to Sue Doan’s comment “And what about us that fall in the category that make more than $75,000 and single? I will get exactly what I got under the Bush plan….a whopping $15.00…..i can’t even fill my gas tank for that!!”
Maybe not Sue, but you can already afford to put gas in your car on your salary. The tax cut is supposed to help those that don’t make that much. My wife and I have a combined income is less than what you make on your own, and we both work very hard. So go buy something and stimulate the economy! You can afford it.
After all these billions of dollar given to the banks and no one can still get a loan and people all still losing there home at alarming rate with no help in site no matter how much the government demand or stress that the tarp money was designed to help the banks all still pocketing the money and furthering their own private agenda with no concern for the government demand or the Americans needs. So i say sinch its the peoples money that is now been used to line the pocket of the big banks and CEO. Why not just give the Americans people that which belong to the Americans people. I read a story in a news paper that stated their is about 305mil peoples in the U.S. and out of that 700bil every head of house hold could have been given 2or3 million dollar with the condition that they paid off theirs homes which i think would have done more for the economy. And still over half of the 700bil dollars would have been left for the greed big banks and CEO. So insted of the GOV. giving the power to the people it would rather risk letting the country go into a depression
I can understand both Sue and Matt’s positions. It does seem like a large enough salary to buy lots of gas, but the truth is Sue is taxed far more than most realize each time she is paid and then does not have the benefit of many tax credits at the end of the year. In all probablity, she may even owe additional monies to the IRS at the end of the year. She makes money, she never sees and likely works very hard for it also. Matt and his wife, on the other hand, do not make it or see it and has little tolerance for the complaints of those who seem to be in better positions. The truth is, most people have been effected by the financial crisis in one way or another. Regardless of how or how much we have been effected, we ALL are deserving of some relief.
What arbitrary income limits ignore is that it costs a lot more to live, for example, in New York City or San Francisco or even Seattle than it does to live in Toledo (OH) or Caldwell (ID) or Cordele (GA).
Numbers like $75K are picked for political reasons — and possibly math ones as well (x% of the population would benefit).
Sylvester, you have a good point about TARP and I’ll be writing about it later this week.
And Crimson Care, I agree with you that relief to “everyone” would be nice. But right now, my extended family is doing “ok” (although we’ve certainly been affected, especially the two sets of parents who are retired and living on investments). So I’d rather “relief” be focused on families who aren’t, through no fault of their own. And that means JOBS, not “go spend money at retail” faux “stimulus” packages.
If you earn over 75 grand and single, why do you need any help? It’s the poorer who need help. Those without jobs. Those on ssi and ssdi. Those who ran out of unemployment. I can’t work through NO fault of my own but I wish I could work.
i dont know much about politics even though i have been paying attention alot lately. why do we have to bail out banks and other companies. why dont the government give the american taxpayers the bail out stimulus money then we can stimulate the economy are selves we would be able to save our house pay our debts or even buy a house. and there for we are putting the money back to the banks. so they can start lending again. I think we are fixing nothing but the greety ceo’s of these companies who are bankrupt but yet they get there million dollar bonus. and we want to give them money. we will still be in they same situation that we are in now. so someone outside the political ring should speak up and we as american taxpayers should have the right so how the money is spent or get rid of the ones on the hill that are not in our best interest get new fresh ideal people get rid of the old that dont want change. we all need some help in different ways i know to many people that pray everyday that they have a job the next day.
“And has anyone figured out how this will impact self-employed Americans?”
Nope, but I do know for sure how it will impact the rapidly growing number of UN-employed Americans. Nary a twit.
Robert
Crimson Care is exactly right. I am taxed heavily and barely get half of what I earn. To the rest of you, I have been laid off 4 times in my career and have worked extremely hard and have had to sacrifice a lot to get to where I am. Losing your job in bad economic times is awful. I have been there so I know the struggles that all of you are experiencing. I just think the Stimulus package should be for ALL Americans.
I encourage y’all to look at how the House wants to spend the money: Review The “Emergency” Economic Stimulus Bill.
Robert, there is a some benefit extension for the unemployed — not a lot, but some.
Sherry — there are good reasons to try to keep banks from failing. I don’t think that Congress & The White House picked the best route in 2008, but I (reluctantly) agree that something needed to be done.
Unfortunately, the government would rather us spend any “rebate” we get. It doesn’t stimulate the economy when we pay off debt — especially since we (the people) have given banks billions of dollars and they aren’t increasing their lending. So our giving the banks money to enable more lending is unlikely to help the economy (via new loans), if that big influx of cash from the U.S. Government didn’t help. :-/
I made about 20k last year and I did not recieve one penny from the government. How fair is that for someone who works very hard and is still in college and is trying to take care of their family at the same time. I certainly hope that Obama has this under control and knows what he is doing.
As a victim of the recession (unemployed), I think most would agree that we don’t want extended unemployment benefits. WE WANT JOBS! I’ve been a productive tax-paying worker for almost 40 years. And I need to continue as such.
This economic crisis we’re in now has been coming for a very long time. You don’t have to have PhD in economics to see this coming. But our elected so-called reps have been too busy lining their pockets in support of corporate greed. American workers have been losing jobs at a steadily increasing rate for years. Corporations move their businesses overseas, with total disregard to American workers, because the CEO and colleagues can reap more profit and of course the huge bonuses. These are businesses that were already successful here. It’s not a fiscal necessity to relocate. And over the years, many thousands of loyal, dedicated, skilled, talented American workers get pink-slipped while a few get ridiculously wealthy. I used to vote. They taught us in school all that crap…..we, the people…..what they meant was…we, the rich and powerful people. “You can change things with your vote”…yeah, right! Cost of living and inflation have made whatever gains made in wages meaningless. Less than meaningless. I lived better in 1972 making $4 an hour than I do now making $40. Good, hard-working people lose their homes! Do any of you congressmen and senators have any idea how devestating and traumatic that is? And then “investors” buy up the foreclosures 3 or 4 at a time. (for profit, of course) Not a thought goes to those who,through no fault of their own, fell victim and lost. It happened to me. I know. And I know it’s highly unlikely I’ll ever be able to have a home of my own again. There’s nobody in DC that represents me, never has been. Politicians are liars, corporations are cut-throats, and American workers have been discarded by them as they would dicard an empty penny-candy wrapper. American dream? They took mine away.
my husban retired from gm. we got our ins cut. we have to pay all of our Dr appontiments and have to pay 10% of all other cost,and we are not old enough to get own medicare. how is $250.00 gone a help me. they can keep it,the middle income bracket is paying out there but’s,