Stimulus Info

I wrote this Op-Ed for the Gettysburgian last week.

Now that the $789 billion stimulus package has been passed by congress and enacted into law what will happen to the economy? Will this solve all of America’s financial problems and set the country on the right path? These are the questions that everyone seems to be asking. The stimulus package was passed February 13, 2009 by the House of Representatives and the Senate with only three Republican Senators crossing party lines to vote in favor of the bill. The three Republican Senators that crossed party lines were Arlen Spector (PA), Susan Collins (MI), and Olympia Snow (MI) who all come from somewhat moderate states.
The process that gave us this final incarnation of the American Recovery and Reinvestment act, referred to as the stimulus package, was complicated and involved in depth debate about specific provisions. Both the congress and the senate voted to approve their own versions of the bill weeks ago which then required the bill to be sent to a conference committee which was responsible for synthesizing the bill into a single act that would be voted on by both the House and Senate which would then be ratified by President Obama.
The Stimulus package was primarily divided into tax cuts and spending programs. The tax cuts and tax relief programs have an estimated cost of $211.8 billion while the mandatory and discretionary spending programs will increase by $575.3 billion. The tax highlights can be broken down into a few major categories. The largest tax cut relates to creating a tax credit for social security. This tax credit is estimated to cost $116.2 billion over the next eleven years and somewhat resembles the parameters of the Bush tax rebate. So, families making under $150,000 per year and individuals making under $75,000 will qualify for tax credits up to $800 and $400 respectively. This section, however, makes no special provision for single parents which make over $75,000 and under $150,000.
Another major form of tax relief that people will benefit from will be in Alternative Minimum Tax relief. The AMT is separate from the income tax system and couples who earn over $45,000 per year might be required to pay this tax. This tax was originally meant to tax the rich who sheltered their taxes from normal income taxes, but has been affecting more and more people over the years since the tax is not indexed for inflation. This provision of the stimulus act will significantly decrease the amount of people paying this tax by raising the AMT exemption to $70,950 for couples and $46,000 for individual filers. This increase in the exemptions will cost the American Government $69.8 billion over 11 years and constitute the second largest tax change. In addition to these two major tax credits the stimulus package also includes tax changes to retiree assistance, the earned income tax credit, child credit, education credit, and homebuyer credit in addition to business tax credits.
In addition to these major tax breaks the Democrat government will be engaging in large public works and spending programs. The large spending programs fall into categories like jobless benefits, increased education, transportation construction, low income assistance, energy reform, environmental protection, health care reform and various other programs. These spending provisions will be expected to create most of the three million jobs that the Obama administration is expecting to save or create as a result of this bill.
This stimulus package appropriates almost $100 billion for education expenditures in various types and levels of education. This bill allocates $39.5 billion to local municipal school districts for average students in elementary, middle and high schools. The stimulus also gives $13 billion in grants for disadvantaged students and $12.2 billion for special education programs. College students may also benefit from the stimulus through the increase in Pell grants by $500. Obama has placed a large focus on education which he is trying establish through the first bill of his presidency.
Infrastructure makes up a second large part of the stimulus package and can arguably include transportation expenditures, mass transit, railway systems, public housing, and energy infrastructure improvements. The conventional infrastructure like road and railway construction totals approximately $45.2 billion to be spent as soon as possible. The stimulus package also provides for new energy transmission systems which are commonly viewed as similar to the rural electrification program. This section of spending is smaller the some would have initially expected and is reminiscent of the programs that Franklin Roosevelt passed as pieces of the new deal during the great depression.
The effects of this stimulus package will take years to figure out and many economists are currently very unsure whether or not this stimulus package which has been signed into law by president Obama will create as many jobs as are predicted. However, if the stimulus package does not create the amount of jobs predicted it is hard to imagine this package causing immense harm to the struggling economy.