Obama_Stimulus_Package

Economic Stimulus Analysis Project Introduction- We will not rebuild our economy on the old model of bubbles and busts. We'll only climb out of the current crisis by creating a new, sustainable foundation for our economy's future and make the tough choices to put our economy back on the road to long-term prosperity. President Obama inherited a terrible mess: a $1.3 trillion deficit, two wars, rising unemployment and unprecedented crises in our banking system. The Obama Administration has worked tirelessly to address our immediate problems of rising unemployment, falling home prices and limping credit markets, while taking a longer view in laying a strong foundation for future economic growth that benefits all Americans. We are fighting for economic recovery on all fronts. President Obama's recovery package aims to: Double within three years the amount of energy that could be produced from renewable resources, an ambitious goal given the 30 years it took to reach current levels. Advisers say that could power 6 million households. Upgrade 10,000 schools and improve learning for about 5 million students. Save $2 billion a year by making federal buildings energy efficient. Triple the number of undergraduate and graduate fellowships in science. The plan would spend at least 75 percent of the total cost or more than $600 billion within the first 18 months, providing a massive infusion of cash to the struggling economy, either through bricks and shovels projects favored by Democrats or tax cuts that Republicans have pushed. Either could produce progress the administration could point to if it needs to justify a second economic package. The broad plan puts heavy emphasis on infrastructure that crumbled as state budgets contracted. Governors have lobbied Obama to help them patch holes in their budgets, drained by sinking tax revenues and increased need for public assistance like Medicaid and children's health insurance. Obama's plan would increase the federal portion of those programs so no state would have to cut any of the 20 million children whose eligibility is now at risk. Obama's plan would also provide health care coverage for 8.5 million Americans who lose their insurance when they either lose or shift jobs. "It's a plan that will save or create 3 to 4 million jobs over the next few years" and recognizes "there are millions of Americans trying to find work even as, all around the country, there's so much work to be done," he said. But he cautioned again against expecting instant results: "No one policy or program will solve the challenges we face right now, nor will this crisis recede in a short period of time. (A fact sheet detailing Obama's stimulus plan) Analysis- Barack Obama’s economic plan will inject $828 billion of stimulus into the economy by getting money in the form of tax cuts and direct spending directly to the people who need it most. Obama’s proposal will immediately provide stimulus using means that do not require lengthy governmental or administrative delays. The plan also reserves an additional $45 billion of stimulus that can be injected into the economy quickly in the future if the economy continues to deteriorate. For most Americans, this is a time of great economic anxiety. People are working harder for less and paying more for everything from health care, to college tuition, to filling up the gas tank. Recent data reveals that the unemployment rate has experienced its sharpest monthly increase since 2001(during Presidents Bush first term as president) the last time the economy fell into a recession. Jobs have been lost in a wide range of industries, including construction, manufacturing, retail and the financial services. Since February only 86,000 jobs were created, a tiny fraction of the 2,000,000 jobs the economy needs to help generate our economy. Limited job growth has been coupled with inflation that is outpacing increases in average wages, meaning that even those who keep their jobs have less buying power. Consumer confidence levels are the lowest they have been since Hurricane Katrina and consumers are starting to cut back on spending as evidenced by lower than expected holiday sales with automobile purchases falling to their lowest level in a decade. (The Obama-Biden Plan) Re-strengthening our economy has been Barack Obama’s priority from day one as are president. Months ago he outlined a comprehensive package of economic reforms to help ease the burdens on middle class and working families while making progress on achieving long-run budget balance. But with the economy getting worse by the month, Americans cannot afford to wait until this president measures start to work. Obama believes the government should take steps to restore the confidence of consumers and businesses that we will not let things get worse and encourage them not to cut back further on their spending and investment. Experts agree that an effective stimulus package must provide immediate, temporary, direct economic relief targeted to the people who need it and are most likely to use the funds and increase the level of economic activity in their communities without permanently increasing the budget deficit. The goal should be to lessen the pain that would occur from an economy-wide slowdown, not to use Americans’ economic hardship as a rationale for enacting an ideologically driven policy agenda. Barack Obama believes we must restore fairness to the tax code. Months ago, recognizing the squeeze on working people in this country and the economic difficulties they were confronting, Obama proposed tax relief of up to $500 for 150 million workers. This refundable income tax credit will provide direct relief to American workers facing the regressive payroll tax system, offsetting the payroll tax on the first $8,100 of earnings while preserving the important principle of a dedicated revenue source for Social Security. The economy has weakened significantly. Obama believes we cannot wait until he becomes president to give workers the tax relief they need. He believes we should make half of the tax credit, $250 per worker, available immediately in order to quickly get money into the pockets of Americans. This will help maintain consumer spending, strengthen the economy and ease the squeeze so many Americans are currently experiencing. If there is a three-month cumulative decline in employment, Obama believes we should immediately provide the remaining portion of that tax credit, an additional $250 per worker. Stimulus: $35 billion. Additional Reserve: $35 billion. Research suggests that older Americans are particularly likely to spend rather than save additional money they receive. Obama understands that seniors living on fixed incomes are squeezed by higher prices. (The Obama-Biden Plan) Obama is calling for providing middle and low income seniors who would not benefit from the workers tax credit an immediate, one-time $250 supplement to their Social Security benefit. And if there is a three-month cumulative decline in employment an additional temporary supplement of $250 per Social Security beneficiary should be provided. These payments would not alter the Social Security program and would not use revenue from the Social Security trust funds. This would provide immediate consumer spending in a feasible way. By piggy backing on the Social Security Administration’s highly efficient payment system, these supplemental payments will stimulate consumer spending in the most rapid way possible. Stimulus: $10 billion. Additional Reserve: $10 billion. In addition to taking important steps to prevent mortgage fraud from occurring in the future and to prevent credit cards from turning into the next subprime housing crisis, Barack Obama has called for establishing short and long-term programs to help responsible homeowners facing foreclosure. Obama’s plan will help people stay in their homes and renegotiate with their lenders. It will not help speculators, people buying vacation homes or people that falsely represented their incomes. It is meant to help responsible homeowners through this difficult period. Given the downturn in the economy, Obama is calling for immediate creation of his Foreclosure Prevention Fund that will dramatically increase emergency pre-foreclosure counseling, and will work through the Federal Housing Administration, Fannie Mae and Freddie Mac to allow families facing foreclosure to responsibly refinance their mortgages or sell their homes. By helping families avoid losing their homes and preventing a further decline in property values, this measure will help lessen the impact of a national foreclosure crisis on state, local and family budgets. Obama was one of the first to speak out about the risks of fraudulent and deceptive lending practices. Because of the housing crisis and the weakening economy, many state and local governments are facing significant revenue shortfalls. Already, 19 states have a projected budget shortfall for their next financial year and balanced budget requirements in most states will force them to cut programs or raise taxes in the face of the downturn. This will worsen America’s economic slowdown and leave millions without a safety net. State and local governments provide important services to low and middle-income families, including services like health care, housing, and income assistance that are particularly necessary during a recession. In addition, as the economy slows, it is important that state and local governments not postpone major infrastructure spending since doing so would exacerbate the economic slowdown. Barack Obama believes that in the areas hardest hit by the housing crisis we should provide immediate, temporary funding to state and local governments so that the decline in property values does not cause them to slash critical public services and cut vital infrastructure spending. Obama’s plan will provide $10 billion in immediate relief to the states and localities hardest hit by the housing crisis. The last time America had a jump in the unemployment rate as large as the most recent one it indicated the start of a recession. But in many ways, our current situation is worse than when the 2001 recession began. The long-term unemployment rate the share of workers having been unemployed for at least six months is nearly twice as high now as it was then. Barack Obama believes we must extend and strengthen the Unemployment Insurance (UI) program to address the needs of the long-term unemployed, who currently make up nearly one-fifth of the unemployed and are often older workers who have lost their jobs in manufacturing or other industries and have a difficult time finding new employment. (The Obama-Biden Plan) As job growth stagnates, the long-term unemployed face additional difficulties re-entering the job market. Providing these workers additional assistance in a time of economic distress is necessary to ensure consumer spending remains at an acceptable level and that they have a chance at restarting their careers. Expanding UI is one of the most effective ways to combat economic turmoil; every dollar invested in UI benefits results in $1.73 in economic output. Obama is calling for a temporary expansion of the UI program for those who have exhausted their current eligibility. Obama also believes that the extension of UI benefits should be coupled with an expansion of UI eligibility to more workers, including many part-time and non-traditional workers who are currently left out of the program. (A fact sheet detailing Obama's stimulus plan) Conclusion- The main purpose of the package was to prevent the re-emergence of the panic that gripped investors in 2008. It also aimed to restore trust in the finance industry by further limiting bonuses for senior executives for companies that received TARP funds. Here is the detail about the economic stimulus plan's seven components: 1) Immediate Relief for Families, this will cost $260 billion over 10 years. Cut taxes by $400 for individuals and $800 for families. A payment of $250 to recipients of Social Security, veteran’s pension and SSI benefits, $70 billion to continue the AMT tax shelter. Greater access to child tax credit for working poor and expand earned-income tax credit to families with three children, a $2,500 college tuition tax credit, $8,000 tax credit for first-time homebuyers in 2009. Deduction of sales tax on new car purchases, Extension of unemployment benefits and suspension of taxes on those benefits through 2009. 2) Modernize Federal Infrastructure $46 billion for transportation and mass transit projects, $31 billion to modernize federal buildings, $6 billion in water projects. 3) Increase Alternative Energy Production $17 billion in renewable energy tax cuts, $5 billion to weatherize homes. 4) Expand Health Care $24 billion to subsidize COBRA benefits for laid off workers, $87 billion to help states with Medicaid, $10 billion to National Institute for Health $17 billion to modernize health information technology systems. 5) Improve Education $54 billion to school districts and states, $21 billion for school modernization, $17 billion to boost Pell Grants, $13 billion for Head Start, and $12 billion for special education programs. 6) Invest in Science Research and Technology $10 billion for science facilities, $4 billion to increase broadband infrastructure, $4 billion for physics and science research. 7) Help Small Businesses $54 billion to help small businesses through a variety of tax incentives and write-offs. Obama increased spending from the $190 billion plan he proposed in his campaign, after realizing that dramatic and aggressive action is needed to stem the economic crisis. Some components of his campaign plan, such as enacting a foreclosure moratorium, have already been implemented by Fannie Mae. Others, such as eliminating taxes for seniors making up to $50,000, are still part of Obama's economic agenda elsewhere. Obama's biggest challenge was to create enough of an economic stimulus to soften the recession, but not big enough to create further doubts about the ballooning Federal Debt, now over $11.5 trillion. In fact, the package included legislation to raise the debt limit to $12 trillion. Obama's tax rebates encourages consumer spending, although many doubt that it is enough. The stimulus for small businesses helps create jobs. The state aid helps keep them from having to either raise property taxes or cut needed services, which also saves jobs. The public works construction retains or adds 3 million jobs. It also lowers transportation costs for consumers. All incentives should be removed once the danger is over to reduce the deficit and avoid future inflation. (Kimberly Amadeo) Recommendation- Yes, I believe President Obama economic stimulus package can have a key or major impact over a two to five year period. The problem is the economy has lost 760,000 jobs this year and some forecasters expect the unemployment rate to exceed to 9- 12 percent by the end of next year. Addressing the financial crisis will help prevent the most severe loss of jobs from the crisis. But taking direct steps to create jobs will also strengthen the economy and help with the financial crisis. Barack Obama and Joe Biden's overall economic agenda is pro jobs, including their plans to eliminate America's dependence on foreign oil and bring down healthcare costs. But I believe Obama and Biden must take additional aggressive steps to jump start job creation right now. Even when the overall economy was growing, most American families were not sharing in this growth. The typical non elderly household saw its income decline by more than $2,000 from 2000 to 2007 as expenses skyrocketed. Weekly wages, adjusted for inflation, are now lower than they were a decade ago. Barack Obama and Joe Biden's overall economic plan will relieve the squeeze on families and foster bottom up growth. But I’ am proposing that they implement several measures immediately. Over the past two years, Americans have lost 20 percent of the value of their homes. In some parts of the country home values have fallen by twice that amount. In combination with a rapidly deteriorating economy, that means more and more families are having a hard time meeting their monthly mortgage payments. At the same time, many states are considering property tax hikes that will burden homeowners still further. And millions of families who have seen the value of their homes fall below the cost of their mortgages need assistance in restructuring their mortgages to stay in their homes. I consider my recommendations for President Barack Obama and Vice President Joe Biden's economic stimulus package will provide direct relief to help America's homeowners pay their mortgages, stay in their homes, and avoid painful tax increases while protecting taxpayers and not rewarding the bad behavior and bad actors who got us into this mess. References: 1) The Obama-Biden Plan. Change.Gov / January 2009. July 27, 2009. http://change.gov/agenda/economy_agenda/ 2) A fact sheet detailing Obama's stimulus plan. Barack Obama.com 01-01-08/ 7-27-09 http://obama.3cdn.net/8335008b3be0e6391e_foi8mve29.pdf 3) Economic Stimulus Package, by Kimberly Amadeo, About.com. 7-26-08/ 7-27-09 http://useconomy.about.com/od/candidatesandtheeconomy/a/Obama_Stimulus.htm [pic]