Wednesday, January 28, 2009

Will Obama's Stimulus Plan Work?!?

I can balance a checkbook and whatnot, but I certainly don't consider myself an economist. So, as further details of the Obama stimulus plan pour in, I'll admit I couldn't tell you whether or not this stuff is gonna work.

Here's just a bit of where your $850 Billion dollars are going.

Construction projects: $90 billion. Fund the rebuilding of crumbling roads and bridges, build clean water and flood control mechanisms and provide funding for mass transit systems.

Education: $142 billion. Rebuild thousands of schools by modernizing classrooms, labs and libraries. The plan would also increase funding for Pell Grants.

Renewable energy: $54 billion. Double production of alternative energy in the next three years. Weatherize low-income homes, modernize 75% of federal buildings and update the nation's electrical grid with a new, cost-efficient "smart" grid.

Health care records: $20 billion. Modernize the health care system by computerizing all of the nations' medical records in the next five years.

Science, research and technology: $16 billion. Invest in science facilities, research and instrumentation to create new industries, new jobs and medical breakthroughs. Expand broadband Internet access in rural and underserved areas.
No real beefs here. Obama's Education Czar has yet to announce his plans for replacing the dismally inept No Child Left Behind legislation, but modernizing schools is important. No word on where these 10,000 modernized schools will be located, but my guess is Obama's an urban guy and he knows what's up. If he doesn't, his folks can put him in the ObaMobile and head down 7th Street to Jefferson Jr. High (where I once tutored) just in case they need further evidence of the deplorable conditions some of our kids have to learn in.

The only problem with this and any sort of construction project is who the jobs are being created for. I have nothing against illegal aliens, but I'm assuming the jobs that are going to turn around the economy are will be ones that pay reasonable salaries and hire folks above-board. If all these gigs are doing is generating money to be Western Unioned South Of The Border, then count this as en epic fail. So, any company that wants this gubb'ment money needs to use it the right way and create jobs for those out of work, and apprenticeships for those entering the workforce.

AB's Grade On Infrastructure Stimulus Plan: B
State Relief

Medicaid: $87 billion. Increase Federal Medicaid Assistance Percentage so states do not have to cut eligibility for Medicaid due to budget shortfalls.

Law enforcement: $4 billion for states and municipality funding for law enforcement.
I suppose this is all necessary to keep folks healthy, but I'm not 100% sure that it needs to be part of any stimulus package.

Besides, states are slashing workers left and right because they can't make payroll. Look at how effed' up California is. I'm not sure what the fix is for this, but I don't see it in the plan.

AB's Grade On State Relief Stimulus Plan: C
Safety Net

Unemployment benefits: $43 billion. Extend through December 2009 emergency unemployment insurance assistance to states. Increase weekly unemployment benefits by $25, and provide incentives for states to expand unemployment coverage.

Cobra: $39 billion. Tax credit for recently laid-off employees to help pay for discounted health care. Obama estimates the plan will help 8.5 million people who recently lost their jobs.

Feeding the hungry: $20 billion. Increase food stamp benefits by 13%, and provide support for food banks, school lunch programs and WIC.
Funding Cobra and unemployment benefits is a must. Until jobs come back, folks will need help staying healthy and keeping the lights on. Some folks would call this socialism and "an unfair transfer of wealth". I call it compassion.

If my job were outsourced tomorrow (which could happen to virtually any hi-tech gig), I'd bust my ass to ensure that my family stayed fed and we had heat. That's my responsibility. But for creating conditions that led to this loss of job, it's the gubb'ment's responsibility to help me until I can get back on my feet. You can call this welfare if you want. Whatever. Put yourself in that situation and tell me you wouldn't want a helping hand.

AB's Grade On Safety Net Stimulus Plan: A
Tax Cuts for Individuals

Middle-class tax cut: $145 billion. Tax cut amounting to $500 a year for individuals and $1,000 for couples. The full credit would be limited to those making $75,000 or less ($150,000 or less for workers filing joint returns).

Low-income tax cut: $5 billion. Expand the Earned Income Tax Credit, which is a refundable credit for low-income workers. Furthermore, the Make Work Pay Credit would be refundable, meaning that even tax filers without any tax liability -- typically very low-income workers -- would receive one.

Child tax credit: $18 billion. Temporary increase in the amount of the child tax credit that would be refundable.
You could debate all day whether or not tax cuts help middle and low income workers. One thing that's undebatable is that this emphatically is not welfare. Again, these tax cuts are only for people working. Nobody sitting on their butt is getting a check, something some Conservative commentators conveniently overlook when discussing Obama's plan.

While we're at it, repeal Bush's tax cuts for the wealthy. These folks already have so many loopholes that the rest of us aren't eligible for or simply don't even know exist. They'll be just fine.

What's perhaps most absurd of all is that the very folks on TV calling Obama's plan socialist are making CEO level salaries. Rush Limbaugh made $33M last year. Bill O'Reilly made $10M. Sean Hannity just inked a $100 million, five-year deal. Does nobody see the obvious conflict of interest? Would you trust a pimp who was pushing legislation to legalize prostitution? C'mon now.

AB's Grade On Tax Cuts for Individuals Stimulus Plan: B+
Tax Cuts for Businesses

Small business write-offs: Obama would increase the amount of expenses small businesses can write off to $250,000 in 2009 and 2010 from the current $125,000 level.

Tax cuts for companies suffering losses: $17 billion over 10 years. Obama would temporarily broaden the "net-operating loss carryback" to five years, up from two years currently. The provision would let companies apply their 2008 and 2009 losses to past and future tax bills so they can get money back on taxes they've already paid or would otherwise have to pay.
I'm admittedly out of my league here, but I'm sure one of you Jr. Economists can chime in.

AB's Grade On Tax Cuts for Businesses Stimulus Plan: Incomplete.

Overall, whether or not this plan succeeds remains to be seen, and will ultimately determine whether or not Obama's first term merits another round come 2013. But one thing is for certain: simply cutting taxes without spending any more money isn't gonna work. If the GOP was wise, they'd be figuring out a way to work with Obama on a compromise that makes both sides look good rather than doing all this tough guy posturing that will ultimately amount to nothing (they're outnumbered after all) and make them look like a-holes when/if it does indeed stimulate the economy after all.

We'll see how this pans out.

AB's Overall Grade Obama's Stimulus Plan: B

Question: Item for item, where do you have issues with Obama's stimulus plan? Do you think this will accomplish its overall goal of improving the economy or are we better off doing nothing and waiting for the economy to correct itself? Is there any shame in collecting unemployment benefits?

Stimulus 101: What's in the Bills [CNNMoney]

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