America’s new stimulus plan is not like the last, don’t be decieved

Below is an excerpt of information taken from this article (The bold information is from the article, the remainder is my additions and discussions.

“The total size is set at $825 billion.

Tax Cuts – $275 Billion: Cutting payroll taxes by $500 per individual and $1,000 per family.
The package also includes tax loss carry backs of 5 years instead of the usual two for corporations.

This is not the same thing as the previous stimulus bill, where individuals received rebate checks. Rather, it seems this will benefit citizens for 2009 taxes, not 2008 at all. Moreover, this is less money than the previous round where individuals received $600 each, and $300 for each Child.

Aid to States – $119 Billion: The biggest part of this is to help states pay for Medicaid at $87 billion. There is also $25 billion targeted to help maintain public safety and other critical services, and $7 billion directly targeted to help keep law enforcement going.

States are generally prohibited by their constitutions from running deficits (although they have been able to find ways around that in the past) and have seen two of their biggest revenue sources dry up, sales taxes and property taxes. Without aid they would have to dramatically cut back on services, laying off many state workers and adding to the unemployment roles.

In some states like California, the projected deficits are so deep that the hole could not be filled even by cutting more than 75% of employees. I’m not sure how safe the remaining prison guards would feel if three out of four of their co-workers were laid off.

The $119 figure is not enough to fill the hole, and states will still have to make cuts, but at least they can be a bit more selective about it.

This maybe necessary – however, it is not sustainable nor does it address the root problem, the fact the medicaid has been a disaster and poorly managed. Throwing more money at the problem will not fix it, just delay it. Bottom line, this government has proven they cannot manage socialized programs.

Education – $117 Billion:

This includes $41 billion to local school districts, targeted at low income areas or that have heavy loads of special education students. An additional $39 billion will go to other school districts as well as public universities.

School districts are generally dependent on property tax revenues and have been very hard hit by the downturn in the housing market. This will prevent masses of school teachers from being laid off.

Some of this money will also go into construction projects. There is also $15 billion to states for meeting some key performance measures, although I have not seen what those measures are, and also $22 billion aimed at higher education, including increasing Pell Grants.

While many will argue that local public schools are not always the most efficient places, allowing our schools to be hard hit by the economic downturn is not a recipe for long-term economic health. Also, it’s not like that 13-year-old can just come back and take the seventh grade over again when the economy improves.

Once again, this does nothing to combat the real issue, rather it throws money at a problem that has been brewing in many inner cities for years.  Why the federal government should even be involved in state education is beyond me.

Aid to Those Hit Hardest – $106 Billion:

This includes $43 billion for extended unemployment benefits, $39 billion to help those laid off keep their COBRA health benefits, $20 billion to increase food stamps and $4 billion to increase some social security benefits.

These sorts of expenditures are among the ones with the most ‘bang for the buck’ in terms of stimulating the economy. People who are really on the ropes financially are likely to spend the money quickly, which will increase the number of jobs in the economy.

Most econometric studies have found that these sorts of expenditures result in more than $1.50 of economic activity for every $1.00 spent. This is in addition to the obvious humanitarian benefits.

This does little however to fix the problem, rather it allows those affected by layoffs to live, because once again, state governments mismanaged their unemployment funds.

Infrastructure – $90 Billion:

Including $30 billion for Roads and Bridges, $31 billion to upgrade federal buildings (especially to make them more energy efficient), $19 billion for water and environmental projects and $10 billion for public transit.

This sort of spending does double-duty. It stimulates the economy now and it leaves lasting economic assets. The problem is it often takes too long to get the projects up and running to help immediately.

However, this economic downturn is likely to last a long time. I think those hoping for a second-half recovery this year are fooling themselves.

Our infrastructure is badly decayed, and this sort of expenditure would be justified even if the economy were just fine and dandy. In some cases, the return on this sort of investment comes from what doesn’t happen. Think about what the ROI of a few hundred million spent in 2002 or 2003 upgrading the levies in New Orleans would have been, even if it never showed up in any economic report.

I am disappointed that there is not more spending in this area.

While this guy is disappointed, I’m confused. We are robbing Peter to pay Paul. You are simply taxing every American to finance jobs for a select few. This may need to be done, but this does nothing to stimulate the economy on a permanent basis.

Energy – $54 Billion:

This includes $32 billion to rebuild and modernize the electrical grid, which is vital if we are going to move in the direction of alternative energy like wind and solar.

There is lots of potential for building wind farms in North Dakota, but not that much need for all that electricity in North Dakota — it needs to get to the Twin Cities and Chicago. Lots of potential for solar in Arizona, but the electricity needs to get to L.A.

In addition, a smart grid would make blackouts less common, and would lessen the need to build new baseline power plants and allow the existing plants to run closer to full capacity all the time.

The rest of the energy investments ($22 Billion) would go to weatherize and insulate public housing. Conservation is generally among the cheapest sources of ‘new’ energy production.

Science – $16 Billion:

$10 billion to fund more scientific research and upgrade research facilities. The return on such investments long term is by its nature uncertain, but often huge. In the meantime, it does stimulate the economy just like any other building project would.

There is also $6 billion set aside to provide broadband internet services to rural areas, sort of like a 21st-century version of FDR’s rural electrification efforts.

Other – $48 Billion:

Government stimulus spending is really the only way to try and stabilize the economy. The spending is over two years, so $412.5 billion per year. That works out to be about 2.5% of GDP.

The point in writing this article is that I believe man yAmericans have been tricked into thinking they will actually benefit, by a cash payment from this bill, when in fact, the majority won’t see a dime for a long while, if ever.


Leave a Response

You must be logged in to post a comment.