President Obama held his first-ever prime time press conference Monday evening to outline the state of the economy and why it is crucial to pass his Economic Recovery plan.
No GOP Votes!
The Washington Post reports: The House approved an $819 billion stimulus package on a near party-line vote yesterday, a plan breathtaking in size and scope that President Obama hopes to make the cornerstone of his efforts to resuscitate the staggering economy.
Obama engaged in an all-out lobbying push for the bill, which is among the most expensive pieces of legislation ever to move through Congress, and marked a big victory for his presidency a little more than a week into his term. He will now turn his attention to the Senate, where Democrats are scheduled to begin debate on the measure on Monday and the price tag is likely to reach $900 billion.
Larger than the combined total cost of the wars in Iraq and Afghanistan so far, the two-year stimulus plan would provide up to $1,000 per year in tax relief for most families, dramatically increase funding for alternative energy production, and direct more than $300 billion in aid to states to help rebuild schools, provide health care to the poor and reconstruct highways and bridges.
But Obama's personal salesmanship effort failed to secure a single Republican supporter for the spending plan, which passed on a 244 to 188 vote. Just a day after the president spent more than an hour behind closed doors at the Capitol seeking their support, all 177 House Republicans opposed the measure, arguing that it would spend hundreds of billions of dollars on initiatives that would do little to stimulate the economy. Eleven Democrats opposed the bill.
In a statement issued after the early evening vote, Obama said he was "grateful" for the House action.
"There are many numbers in this plan," he said in the statement. "But out of all these numbers, there is one that matters most to me: This recovery plan will save or create more than 3 million new jobs over the next few years."
While Obama made no mention of the unanimous Republican opposition, a top adviser immediately warned of the political fallout GOP lawmakers could face from constituents struggling in tough economic times.
"There will be people in districts all over the country that will wonder why, when there's a good bill to get the economy moving again, while we still seem to be playing political gotcha," White House press secretary Robert Gibbs said in an interview.
Some moderate Republicans who opposed the bill left open the chance of supporting the final version if the White House and Senate address their concerns about spending. And Democrats remain hopeful of securing a more bipartisan result in the Senate, where committee action has driven up the cost as the amount of tax relief has increased, something Republicans have demanded before they will consider offering their support.
In addition to other tweaks to the tax portion of the package, the Senate Finance Committee added a $70 billion fix to the alternative-minimum tax to the chamber's version of the bill, a provision aimed at preventing the tax from being applied to middle-class households, pushing the total cost to at least $890 billion.
The Finance Committee also added a provision that would reduce taxes on businesses that buy back their own debt at a discount. Senators in both parties were readying amendments to make further changes, including a proposal that would dramatically reduce taxes, from 35 percent to 5.25 percent, on corporate profits earned abroad and brought back to the United States.
Advocates say that the measure, sponsored by Sens. Barbara Boxer (D-Calif.) and John Ensign (R-Nev.), would prompt companies to "repatriate" hundreds of billions of dollars, money that could be used to expand domestic operations and save jobs. Supporters estimate it could increase federal tax revenue by as much as $40 billion. More HERE
Source: CNN Money.com
David Goldman, at CNNMoney.com writes: Stimulus 101
-- You've probably noticed: The Obama administration and Congress are talking about spending an unprecedented sum of money to try to revive the economy.
President Obama and House Democrats laid down the marker with an $825 billion package of spending and tax cuts. The Senate version will be taken up by two committees on Tuesday.
Dozens of proposals. Hundreds of pages of legislation. Billions of dollars.
What are some of the headline proposals, and what is the debate all about? The legislation is a work in progress, but here is an overview.
The case for: By investing in renewable energy, health care, education and modern construction projects, the Obama administration expects to create between 3 million and 4 million jobs and address key sustainability issues.
The case against: Opponents argue the spending will lead to a rapidly increasing and unsustainable deficit. They also say that a majority of infrastructure projects will take too long to implement.
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.
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.
The case for: As states face budget shortfalls, Obama's plan seeks to help states pay for Medicaid and unemployment benefits. State fiscal relief will be allocated to prevent increases in state and local taxes, or cuts in government services.
The case against: Opponents say the bill should focus on job creation that will make an immediate impact the economy.
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 municipalities for law enforcement.
The case for: Obama proposed temporary programs to protect those most vulnerable to the effects of the recession.
The case against: As with state budget relief, opponents say the bill is too big and should simply aim to create new jobs. Some lawmakers have said some of the "safety net" spending provisions are wasteful, and many have called the bill unfocused.
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.
The case for: Throughout his campaign, the president pushed for tax cuts for low- and middle-income families. As a form of stimulus, it has the added advantage of being paid out faster than other provisions in the bill, and economists say those income groups are most likely to spend rather than save the money.
The case against: Opponents say the size of tax cuts for both individuals and businesses do not go far enough and don't make up a big enough portion of the entire package. Furthermore, they oppose giving tax breaks to people who get back more money from the government than they pay in income and payroll taxes.
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: Up to $18 billion. Temporary increase in the amount of the child tax credit that would be refundable.
The case for: Obama's plan seeks to help ease the tax burden for small businesses, as well as allow companies suffering losses because of the downturn to get some tax relief by applying losses to more years in which they booked a profit.
The case against: Opponents say too small of a percentage of the total package -- 2.7% -- goes to small businesses, and to businesses in general.
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: Up to $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. Link HERE 
Source:Congressional Budget Office, Douglas W. Elmendorf - Director’s Blog
CBO has released a cost estimate for H.R. 1, the American Recovery and Reinvestment Act of 2009, which was introduced today in the House of Representatives. A link to the full cost estimate can be found here.
As summarized in the cost estimate, H.R. 1 would specify appropriations for a wide range of federal programs and would increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also would reduce individual and corporate income tax collections and make a variety of other changes to tax laws.
Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $92 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.
In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.
In combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.
The budgetary impact of the bill stems primarily from three types of transactions: Direct payments to individuals (such as unemployment benefits), reductions in federal taxes, and purchases of goods and services (either by the federal government directly or indirectly via grants to states and local governments). CBO estimates that impacts from the first two categories of transactions would occur fairly rapidly. In the third category, CBO estimates slower rates of spending than historical full-year spending rates in 2009 for a number of reasons:
Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in funding and resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, states, and other recipients of funding would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to spend added funds quickly as they expend their normal resources. The seasonal nature of some spending also affects the speed at which activities can be conducted; for example, major school repairs are generally scheduled during the summer to avoid disrupting classes.
The following table summarizes CBO’s and JCT’s estimates of the budget effects of H.R. 1.
As reported by The Huffington Post and The Progress Report: Today, President-elect Obama is moving forward with what he has billed as his top priority: an economic stimulus package called the "American Recovery and Reinvestment Plan." He is scheduled to meet with House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV), and possibly the Republican leaders in both chambers. In his weekend radio address, Obama said that his goal is to put together a plan that "not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term." The package will focus on providing assistance to low- and middle-income Americans, strengthening the nation's infrastructure, and investing in states that are struggling with falling revenues, with the goal of creating or preserving at least 3 million jobs over the next two years. Underscoring the urgency of addressing the nation's faltering economy, Pelosi has said that her goal is to pass a bill that is ready to be signed by Obama once he takes office on Jan. 20. However, House Majority Leader Steny Hoyer (D-MD) has cast doubt on such an expedited timeline, and many conservatives are already indicating that they plan to block this progress. Obama spokesman Robert Gibbs conceded that the stimulus package is "unlikely" to be ready by the inauguration.
Middle-Class Assistance:
Over the weekend, Obama officials announced that they would like Congress to direct 40 percent of the stimulus bill toward tax breaks aimed at businesses and middle-class workers. Most workers would receive a $500 payroll credit, and some businesses would "receive incentives to create jobs and make equipment purchases more affordable." While these cuts may be able to give the economy a kick-start right away, they are also meant to assuage skeptical conservatives. Congressional Democratic leaders are also considering unemployment benefits and health coverage to assist jobless workers, as economists predict that the U.S. unemployment rate could reach 10 percent by the end of 2009. Obama's goal of creating 3 million jobs will be spurred by the creation of "green" jobs that would not only begin addressing the country's energy needs by shifting to clean energy but also contribute to private sector job creation. A Center for American Progress report by Dr. Robert Pollin and University of Massachusetts Political Economy Research Institute economists estimates that by investing $100 billion over two years, the United States could create 2 million jobs, "with a significant proportion in the struggling construction and manufacturing sectors."
Infrastructure Development
Another important part of Obama's job creation plan is infrastructure investment. When a water main broke in suburban Maryland last month -- trapping a dozen commuters in their cars as four feet of freezing cold water surged around them -- the public received a startling reminder of the current state of the country's crumbling infrastructure. The American Society of Civil Engineers estimates that $1.6 trillion is needed over the next five years to repair and restore the nation's infrastructure." As NPR has pointed out, "Every $1 billion the federal government commits to roads, bridges and other infrastructure helps to support some 35,000 jobs." This program should repair existing roads and bridges, not pay to build new highways that would foster sprawl and increase oil consumption. "The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn't needed," wrote New York Times columnist Paul Krugman in October. "Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let's get those projects rolling." Indeed, a November Washington Post-ABC News poll found that almost 70 percent of those surveyed said "they support new federal spending of as much as $700 billion on construction projects and other programs to try to stimulate the economy," even if it means increasing the size of the deficit.
Direct Aid to States:
As CAP has noted, a stimulus package also needs to "help states cope with falling revenues that otherwise force them to lay off workers, cut spending on critical safety-net programs, and shortchange areas of long-term importance such as education, infrastructure investment, and health care." Several governors have already appealed to the federal government for assistance. "I firmly believe that if it took only two weeks for the federal government to find $700 billion to bail out Wall Street and bank executives," New York Gov. David Paterson (D) told Congress, "then we ought to be able to find a fraction of that amount to help preserve essential services at the state level." Health care, in particular, is one of the top costs plaguing the states. Currently, at least 27 states are facing budget gaps and some have already slashed safety-net programs. Medicaid consumes an average 17 percent of state budgets. Media reports indicate that Obama and congressional leaders are pushing for direct aid to states, which may "come in the form of payments that could help meet the growing costs of Medicaid spending."
Conservative Obstruction:
Despite the urgency after eight years of the Bush administration's do-nothing attitude, Senate Minority Leader Mitch McConnell (R-KY) has said that he and his fellow conservatives are in no rush to provide this important economic relief and plan to put the brakes to attempts to quickly pass a package. "I believe the taxpayers deserve to know a lot more about where it will be spent before we consider passing it," he said in a statement last week. According to the Washington Post, McConnell has also "called for a weeklong cooling off period between when the bill is drafted and when it is voted on, allowing time to dissect it for signs of 'fraud and waste.'" Conservatives have the power to filibuster the legislation if they oppose it. (McConnell, however, had no problem quickly passing President Bush's Wall Street bailout, even though that package had almost no oversight safeguards. In fact, he "led the battle" to pass the bill.) The real risk, according to many economists, is in doing too little. Krugman, for example, has said that he would like to see a "bigger" stimulus package -- as high as a trillion dollars. New York University Economics Professor Nouriel Roubini has explained that failure to enact a fiscal stimulus could actually result in wider deficits, which would send the country into a "very severe recession."
The Speaker of the House blog, The Gavel reports: The Rules Committee has posted The American Recovery and Reinvestment Act of 2009 online. The bill will be formally introduced on Monday, January 26th. Read the legislation (.pdf)>>
Read summaries from the committee markups:
More resources:
News Outlets Across the Country Highlight Impact of American Recovery & Reinvestment Act
Growing Support for the American Recovery & Reinvestment Bill
American Recovery and Reinvestment Act on Speaker.gov’s Current Legislation page
The Washington Post reports: President Obama pressed aggressively for his massive economic recovery plan yesterday, laying out the most detailed benchmarks to date of a stimulus package that would cost at least $820 billion and warning that the nation's economy could become dramatically worse without major federal investment.
With Congress preparing to take up the stimulus bill this week, Obama described what he would do with a recovery package aimed at saving or creating as many as 4 million jobs. The White House outlined proposals designed to appeal to Republicans who have resisted the scale of federal spending, as well as to average taxpayers, many hit hard by the recession, who have not felt the benefit of earlier government bailouts.
In his first weekly presidential radio and video address, Obama said his American Recovery and Reinvestment Plan is critical to jump-starting the economy, which lost 2.6 million jobs last year. The plan, he said, would protect workers from losing health-care coverage; modernize public schools, roads and sewer systems; lower energy costs and taxes; and make college more affordable.
This week, the new administration will step up its lobbying efforts to ensure that Obama's signature legislation passes Congress by mid-February. The president, who met with his chief economic advisers yesterday, plans to visit Capitol Hill on Tuesday to court Republican leaders, and top administration officials will fan out on today's political talk shows to press their case.
"Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four," Obama said yesterday. "And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.
"In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."
Some congressional Republicans remain opposed to his plan, saying it includes too many spending programs that may not provide immediate economic relief and arguing that the roughly $225 billion in tax breaks in the Democrats' package is not enough. Obama wants to cut taxes by $1,000 for 95 percent of workers and their families.
"Unfortunately, the trillion-dollar spending plan authored by congressional Democrats is chock full of government programs and projects, most of which won't provide immediate relief to our ailing economy," House Republican Leader John A. Boehner (Ohio) said yesterday in his party's response address.
Boehner spokeswoman Antonia Ferrier described the White House proposal as "just another unfocused, runaway bill loaded with slow and wasteful Washington spending on every conceivable goal."
Boehner criticized some spending proposals in the House Democratic plan, including $6 billion for colleges and universities, many of which have large endowments, and $50 million for the National Endowment for the Arts. "All told, the plan would spend a whopping $275,000 in taxpayer dollars for every new job it aims to create, saddling each and every household with $6,700 in additional debt," he said.
The White House released a four-page report yesterday outlining spending priorities and accountability measures for the recovery package. Obama wants to double renewable energy capacity within three years, creating enough additional capacity to power 6 million homes, and he plans to leverage $100 billion to finance private-sector clean-energy initiatives.
His plan also calls for an expansion of the child tax credit, which would provide a new tax cut to the families of more than 6 million children and increase the existing credit for the families of more than 10 million children. More HERE
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Maryland Gov. Martin O'Malley (D) said yesterday that a stimulus bill pending on Capitol Hill would bring the state as much as $2.9 billion over 27 months for Medicaid, education programs, worker training and "fiscal stabilization" and an additional $1 billion for transit, school construction and clean-water projects.
Virginia officials said the state could be eligible for as much as $800 million for highway projects alone.
"There are many, many projects that are ready to go as soon as we know the criteria and how much money we're getting," said Gordon Hickey, a spokesman for Virginia Gov. Timothy M. Kaine (D).
The stimulus plan is viewed in the two states and the District as something of a bailout. But it remains unclear how much money local governments will get and how many items on their wish lists will be funded, given the vagaries of funding formulas and the evolving nature of the legislation.
Governors and members of Congress are being deluged with inquiries and wish lists from local governments, which see the American Reinvestment and Recovery Plan as deliverance from a fiscal nightmare.
For state and local governments, the situation is deteriorating. Maryland is trying to close a $2 billion shortfall. Virginia has delayed more than $2 billion worth of road and transit projects statewide because of declining tax revenue. The District faces a shortfall of nearly $260 million.
O'Malley said the federal money might allow his state to forgo some cuts in a budget proposal he presented last week for the coming fiscal year. Among the cost-cutting measures in that budget was a proposal to lay off 700 state workers.
"The last thing in the world I would want to do is lay people off in the down economy," O'Malley said.
At a water treatment plant in Silver Spring yesterday, Sen. Barbara A. Mikulski (D-Md.) and Rep. Chris Van Hollen (D-Md.) pledged to seek $75 million to help repair a 5,500-mile system of aging water pipes in Montgomery and Prince George's counties.
The system has sprung 4,000 leaks in the past two years, and the Washington Suburban Sanitary Commission reported 252 breaks and leaks in the five days leading up to President Obama's inauguration. Memories are still fresh of the Dec. 23 rupture that briefly turned Bethesda's River Road into a river. At current levels of funding, it would take 200 years to repair and replace all the water lines, WSSC says.
"Senator Mikulski and I are here to say that help is on the way," Van Hollen told a cheering crowd. More HERE
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As reported by Times Magazine: The American Recovery and Reinvestment Bill of 2009 should be required reading for every citizen from billionaires to the average person. It was issued by The Committee On Appropriations and is the road map for the $825 billion that the Congress and Administration intend to put into the U.S. economy to jumpstart the economy out of the recession.
The most important part of the document may be the description of how the country was dragged into the worst economic period in its history. ( See pictures of the Top 10 scared traders.)
At the beginning of the bill, the authors write: "Since 2001, as worker productivity went up, 96% of the income growth in this country went to the wealthiest 10% of society. While they were benefiting from record high worker productivity, the remaining 90% of Americans were struggling to sustain their standard of living. They sustained it by borrowing ... and borrowing ... and borrowing, and when they couldn't borrow anymore, the bottom fell out."
If that analysis is true, then two other things must be accurate. The first is that the cause of the recession was Americans becoming overextended in their use of credit. The other one, which is a consequence of the first, is that if the government can facilitate future consumer borrowing, the economy will be righted again in short order. That would mean that more complex methods of solving the problems of the recession, such as spending money on infrastructure, would be unnecessary. It would be simpler to take $825 billion and make it available for home equity loans, enlarge credit card lines, and auto loans.
But, the authors of the bill are not willing to follow their own logic, so they have crafted another plan. The first assumption of what the program will do, and among the most important of its goals, is only mentioned in passing. "This package is the first crucial step in a concerted effort to create and save 3 to 4 million jobs." This is a little twist on what is being said in public.
The general assumption about job creation under the program is that it will add 3 to 4 million jobs. But in the introduction to the bill the assumptions about job loss are laid out quite clearly: "Credit is frozen, consumer purchasing power is in decline, in the last four months the country has lost 2 million jobs and we are expected to lose another 3 to 5 million in the next year."
The mathematics of the two sets of employment analysis taken together would show then that no new jobs would be created. The three million or so jobs which will be lost in 2009 will simply be replaced by three million new ones. The jobs lost late in 2008 will not be replaced in this program, leaving a two million job deficit Joblessness will stay at about 7.2%
Other than those details, the money will be well spent.
The states need help, and the federal government means to provide it: A sum of $79 billion in state fiscal relief will be provided to prevent cutbacks to key services
After the plans to help the states, cut taxes, and provide new infrastructure for the nation, the programs get a little off track.
The bill means to spend $44 million to repair the U.S. Department of Agriculture's headquarters. About $400 million will go to repairing national monuments in Washington, which are somehow considered essential to national infrastructure.
Additionally, Congress plans to pay out $200 million to provide financial incentives for teachers and principals to do their jobs better. Another $100 million will be used to establish a set of grants to provide $100 to local governments and nonprofit organizations to remove lead-based paint hazards in low-income housing.
Perhaps the best investment in the bill is for $80 million to ensure that worker protection laws are enforced as recovery infrastructure investments are carried out. In other words, there will be a police system set up to make sure that no one with a new job working on national infrastructure with money provided by the government will have his or her rights violated.
The bill calls for over one hundred programs which Congress plans to enact. These include addressing problems as diverse as community block grants, upgrading the forestry service, bridge removal, and NASA research funding. The remarkable thing about the legislation is that almost every program is ill-defined and subject to broad interpretation and a wide variation as to how it might be enacted.
In a sentence, The American Recovery and Reinvestment Bill of 2009 will have to build a bureaucracy larger than any ever created by the US government in order to manage its many parts.
The first sentence of the bill reads "The economy is in a crisis not seen since the Great Depression." If it requires all of these plans to get America back on the road to recovery, the process will take a decade. More HERE
The Gotham Gazette.com reports: The version of the American Recovery and Reinvestment Plan unveiled on Jan. 15 by House Democrats is breathtaking in its scope and cost. Intended to retain and create 3.7 million jobs over the next two years, the $825 billion package of federal government investments includes dozens of spending measures ranging from $200 billion in fiscal relief to help state and local governments, to $6 billion to extend broadband to rural areas, a 21st century version of Depression-era rural electrification. Two thirds of the total value consists of spending, with one third for tax cuts.
Negotiated with President Barack Obama's transition team, the plan - a.k.a. Stimulus II or ARRP - is an important first step to halt the downward economic spiral triggered by last fall's financial meltdown. As large as it is, though-5 percent of gross domestic product-it is not sufficient to create a sustained recovery. Two other steps are essential. First, more dramatic action is needed to put the brakes on the collapsing housing market. Second, making a recovery sustainable will require a set of policies to lift wages and bolster the middle class. Without these two complementary steps, ARRP might provide temporary relief for our economic illness but not a cure.
Whatever its limitations as a long-term solution, ARRP will provide much-welcome short-term budget relief for New York and other states (45 states face budget gaps). The plan will increase the federal share of Medicaid spending and provide billions in education aid to states and school districts. Both of these measures will help to moderate the severe budget cuts proposed by Gov. David Paterson. New York State should receive upward of $10 billion - and possibly as much as $15 billion - over two years -- funds that will help close the state's budget gaps. Such federal relief will help states maintain their spending and prevent spending cuts or tax increases, both of which would have intensified the downward economic spiral.
A year ago, Congress and the Bush administration agreed to a $150 billion stimulus package that consisted largely of tax rebates. Most economists now agree that last year's stimulus was not up to the task because tax cuts provide less "economic bang for the buck" than most other forms of stimulus. Economic forecaster Mark Zandi, a former advisor to presidential candidate John McCain, estimates that every dollar in tax cuts generates only $1.01 in economic activity, much lower than the spending impact of increasing unemployment compensation ($1.63), state fiscal relief ($1.38) or spending on infrastructure ($1.59). Also, since the tax rebate checks were sent out in May and June, when gasoline prices were skyrocketing, many recipients spent the money to cover their gas costs.
The magnitude of a proposed second stimulus has mounted steadily since last September's financial market meltdown and the ensuing sharp collapse in the consumer spending that accounts for 70 percent of demand in the economy. The spending collapse was compounded by a credit market freeze as Wall Street firms and banks confronted a mountain of bad debts created by high-risk lending and unregulated gambling. The crash of the housing and stock markets destroyed literally trillions in home equity and retirement savings held by millions of middle class households. Along with steadily mounting job losses, this caused households to sharply reduce spending. The collapse of consumer spending is thought to have pulled GDP down by as much as 5 percent during the fourth quarter of 2008.
It is no exaggeration to say that this is the worst economy since the Great Depression. The 2.6 million jobs lost in 2008 were more than in any year since 1945. Overall unemployment could be 9 percent by the end of the year and 11 percent in 2010 in the absence of the recovery plan, according to economist Zandi. Already, unemployment among adult black men is 13.4 percent. Housing prices have fallen 25 percent on average. There were 2.25 million home mortgage foreclosures last year, and one out of every six homeowners owes more on their mortgage than their house is worth.
The proposed American Recovery and Reinvestment Plan is a 21st century version of a government-led recovery and investment program, combining some of the best elements of the Depression-era Works Progress Administration, the Eisenhower era commitment to build the Interstate Highway System, the Apollo Project, and the Great Society. The plan includes spending that will not only provide some short-term stimulus but will increase the long-term productive capacity or efficiency of the economy.
One of the biggest components is $52 billion for various "green jobs" programs from weatherizing public buildings (see related story) and homes to reduce energy demand, to developing a "smart" electric power grid that is both more reliable and better able to transmit clean, renewable energy.
The package would also create jobs by spending $67 billion for infrastructure. Because of the urgent need to boost jobs as quickly as possible, it emphasizes "shovel ready" projects, including mass transit systems, highways, bridges, airports, national parks, water and sewer systems, flood control, and environmental cleanup. The Metropolitan Transit Authority will be able to use some of these monies to fund some of the construction projects and equipment needs in its capital budget. Governor David Paterson submitted an extensive list of 1,922 "ready-to-go" projects to the Obama transition team.
This second stimulus package provides $12 billion to support forward-looking research and development investments that could be particularly important in the future, including biomedical, climate change and alternative energy research, and funds to modernize and expand government and university research facilities.
The ARRP includes $5 billion for job training and employment services, including $1.2 billion to create 1 million summer jobs for youth. It offers additional -- and substantial funds -- for worker training and education as part of the education, healthcare, and science and technology initiatives. There is $5 billion for early childhood development, including additional slots in subsidized childcare and Head Start.
A particularly critical part of ARRP is aid to the unemployed. The program includes $36 billion to extend and modestly increase unemployment benefits, and incentives to encourage states to expand unemployment insurance coverage for low-wage and part-time workers. An additional $30 billion would subsidize health coverage for unemployed workers and provide 100 percent federal funding (i.e., dropping the requirement for a state match) for two years for Medicaid-eligible workers who become unemployed.
Nearly $30 billion would go to increase food stamps, low-income heating assistance, assistance provided under federal Supplemental Security Income, aid for the homeless and Temporary Assistance for Needy Families block grants. A total of more than $11 billion would fund repair and modernization of public housing, help communities build and rehabilitate low-income housing using green technologies, and enable communities to purchase and rehabilitate foreclosed and vacant properties. More HERE
This blog is not affiliated in any way with the Federal government or Barack Obama.com We are also not affiliated in any way with AARP.
This ARRP.US website and blog tracks the American Recovery and Reinvestment Plan. It also plans to provide information, resources, and links to States, Cities, Towns, businesses, non profits and other stakeholders interested in the American Recovery and Reinvestment Plan.
As reported by the NY Times: President-elect Barack Obama and Congressional Democrats are considering major expansions of government-assisted health care insurance and unemployment compensation as they begin intensive work this week on a two-year economic recovery package.
One proposal, as described by Democratic advisers, would extend unemployment compensation to part-time workers, an idea that Congressional Republicans have blocked in the past.
Other policy changes would subsidize employers’ expenses for temporarily continuing health insurance coverage to laid-off and retired workers and their dependents, as mandated under a 22-year-old federal law known as Cobra, and allow workers who lose jobs that did not come with insurance benefits to be eligible, for the first time, to apply for Medicaid coverage.
The proposals indicate the sorts of potentially long-range changes that Mr. Obama intends to push in his promised American Recovery and Reinvestment Plan, as he named it in his weekly Saturday address on the radio and YouTube. They will be combined with one-time measures that are more typical of federal stimulus packages to jump-start a weak economy, like spending for roads and other job-creating public works projects.
As the economy worsened in the weeks after Mr. Obama’s election, advisers and Congressional leaders suggested that a stimulus plan would be ready by the new year for House votes this week. But the House is not expected to vote until next week at the earliest, which will most likely push final action into February, Democratic aides said.
The aides said delays were probably inevitable given the holiday interruptions, the big ambitions of the undertaking and internal tensions over the plan’s components and their costs.
Obama advisers have said the package will carry a total cost of at least $775 billion.
Still, Democrats are wary of slowing down the economic stimulus by provoking the opposition of Republicans, who have warned in recent days that the package must be neither excessive nor rushed. They are also fielding concerns from fiscally conservative Democrats.
In his address on Saturday, Mr. Obama, just off a two-week vacation, also announced that, as expected, he would begin meeting in Washington on Monday with Congressional leaders of both parties in a bid for bipartisan cooperation.
“Economists from across the political spectrum agree that if we don’t act swiftly and boldly,” Mr. Obama said, “we could see a much deeper economic downturn that could lead to double digit unemployment and the American dream slipping further and further out of reach.”
Mr. Obama has pledged to “create or save” three million jobs over the next two years. In his address, he omitted the word “save,” suggesting he would create three million jobs, a goal that many economists consider unattainable under current conditions.
His plan, he said in his address, would “put people back to work today and reduce our dependence on foreign oil tomorrow” through spending and tax incentives to double production of renewable energy; make government buildings more energy efficient; build and renovate roads, bridges and schools; and modernize health care technology.
A main factor slowing down the Obama team’s drafting, it is now apparent, has been the difficulty of reconciling his sometimes conflicting directives.
The president-elect called for including in the plan only proposals that would quickly stimulate the economy. Typically that means one-time spending that gets money into consumers’ hands quickly to spark demand for goods and services.
Both Mr. Obama and Congressional leaders are intent on keeping the price tag below the politically charged figure of $1 trillion.
In the emerging Obama plan, such items will include $140 billion to $200 billion in relief to states to offset their budget-busting costs for Medicaid and education; extension of unemployment compensation for former full-time workers, which runs out in March; and billions of dollars for construction projects that Mr. Obama has called “shovel ready.”
But Mr. Obama has also said his recovery plan must make down-payments on his campaign promises for permanent changes that will reshape the economy, especially for the good of low-wage and middle-class workers. Such changes could carry permanent costs for new energy, education, health care and tax policies.
For example, Mr. Obama previously indicated that he would seek money to develop a national energy grid to harness and distribute power from wind, water and other local alternative energy sources.
As reported by the NY Times — President-elect Barack Obama and Congressional Democrats are considering major expansions of government-assisted health care insurance and unemployment compensation as they begin intensive work this week on a two-year economic recovery package.
Additional money to subsidize local governments’ education costs in the downturn could become a fixture, increasing the once-small federal role beyond its expansion under President Bush. Besides money for school construction and renovations, Congressional aides said they expected an increase in financing to educate students with disabilities and special needs. Officials also are exploring potential increases for Head Start childhood education programs and Pell Grant scholarships for college students.
Rather than propose a one-time tax rebate for all but the most affluent Americans, Mr. Obama is likely to propose what he called during his campaign a “Making Work Pay” tax credit of $500 for eligible individuals and $1,000 for couples. Those who earn too little to pay federal income taxes would receive the credit in the form of a check, intended to offset the payroll taxes they pay for Social Security and Medicare
More HEREBy way of Paul Krugman, here is the estimated impact on employment provided by C. Romer and J. Bernstein.
The estimated impact on unemployment is shown below, in a figure from the document. More HERE
Update 10:10am Pacific Sunday, 1/11/09 For purposes of comparison, here is CBO's projection of unemployment (standard measure), by calender year.
Throughout America’s history, there have been some years that simply rolled into the next without much notice or fanfare. Then there are the years that come along once in a generation – the kind that mark a clean break from a troubled past, and set a new course for our nation.
This is one of those years.
We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has only deepened over the last few weeks. Nearly two million jobs have now been lost, and on Friday we are likely to learn that we lost more jobs last year than at any time since World War II. Just in the past year, another 2.8 million Americans who want and need full-time work have had to settle for part-time jobs. Manufacturing has hit a twenty-eight year low. Many businesses cannot borrow or make payroll. Many families cannot pay their bills or their mortgage. Many workers are watching their life savings disappear. And many, many Americans are both anxious and uncertain of what the future will hold. More HERE
Our country faces its most serious economic crisis since the great depression. Working families, who saw their incomes decline by $2,000 in the economic "expansion" from 2000 to 2007, now face even deeper income losses. Retirement savings accounts have lost $2 trillion. Markets have fallen 40% in less than a year. Millions of homeowners who played by the rules can't meet their mortgage payments and face foreclosure as the value of their homes have plummeted. With credit markets nearly frozen, businesses large and small cannot access the credit they need to meet payroll and create jobs.
Barack Obama and Joe Biden have a plan to revitalize the economy.
The economy has lost 760,000 jobs this year -- and some forecasters expect the unemployment rate to exceed 8 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 Obama and Biden believe we 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 they are proposing that we 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.
Barack Obama and Joe Biden's plan provides 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:
Barack Obama and Joe Biden believe that our deep systemic financial market crisis requires a systemic response. They fought to ensure that the recently-passed financial rescue package gave the Treasury the tools to stabilize the financial system, while protecting taxpayers and ensuring CEOs would not get rich in the process. However, this stabilization will only occur if the Treasury, Federal Reserve, FDIC, and other government entities use their authority and move quickly and aggressively to address the financial crisis.
It is now clear that our financial markets will not restart until financial institutions are lending again. Because of the extensive losses many of these institutions have suffered, they need more capital so that they will have the money to lend to families and businesses. Obama and Biden recognized this early, and were heartened by the Treasury's stated intention to use its recently granted authority to inject capital into our financial institutions. However, Secretary Paulson must turn this intention into action quickly and aggressively, in a manner that strengthens confidence in our banks, protects taxpayers, does not reward CEOs, and is strictly temporary.
In addition, our financial authorities must stand ready to take additional, complementary actions -- consistent with the systemic nature of this crisis -- to ensure this Treasury initiative is successful:
Barack Obama and Joe Biden believe that trade with foreign nations should strengthen the American economy and create more American jobs. They will stand firm against agreements that undermine our economic security.
Barack Obama and Joe Biden believe that it is critically important for the United States to rebuild its national transportation infrastructure -- its highways, bridges, roads, ports, air, and train systems -- to strengthen user safety, bolster our long-term competitiveness and ensure our economy continues to grow.
Barack Obama and Joe Biden will increase federal support for research, technology and innovation for companies and universities so that American families can lead the world in creating new advanced jobs and products.
Obama and Biden will strengthen the ability of workers to organize unions. He will fight for passage of the Employee Free Choice Act. Obama and Biden will ensure that his labor appointees support workers' rights and will work to ban the permanent replacement of striking workers. Obama and Biden will also increase the minimum wage and index it to inflation to ensure it rises every year.
Obama and Biden will crack down on fraudulent brokers and lenders. They will also make sure homebuyers have honest and complete information about their mortgage options, they'll give a tax credit to all middle-class homeowners, and they'll reform our bankruptcy laws to protect working people.
Obama and Biden will establish a five-star rating system so that every consumer knows the risk involved in every credit card. They also will establish a Credit Card Bill of Rights to stop credit card companies from exploiting consumers with unfair practices.
Obama and Biden will double funding for after-school programs, expand the Family Medical Leave Act, provide low-income families with a refundable tax credit to help with their child-care expenses, and encourage flexible work schedules.
Source: Gotham Gazette.com
The version of the American Recovery and Reinvestment Plan unveiled on Jan. 15 by House Democrats is breathtaking in its scope and cost. Intended to retain and create 3.7 million jobs over the next two years, the $825 billion package of federal government investments includes dozens of spending measures ranging from $200 billion in fiscal relief to help state and local governments, to $6 billion to extend broadband to rural areas, a 21st century version of Depression-era rural electrification. Two thirds of the total value consists of spending, with one third for tax cuts.
Negotiated with President Barack Obama's transition team, the plan - a.k.a. Stimulus II or ARRP - is an important first step to halt the downward economic spiral triggered by last fall's financial meltdown. As large as it is, though-5 percent of gross domestic product-it is not sufficient to create a sustained recovery. Two other steps are essential. First, more dramatic action is needed to put the brakes on the collapsing housing market. Second, making a recovery sustainable will require a set of policies to lift wages and bolster the middle class. Without these two complementary steps, ARRP might provide temporary relief for our economic illness but not a cure.
Whatever its limitations as a long-term solution, ARRP will provide much-welcome short-term budget relief for New York and other states (45 states face budget gaps). The plan will increase the federal share of Medicaid spending and provide billions in education aid to states and school districts. Both of these measures will help to moderate the severe budget cuts proposed by Gov. David Paterson. New York State should receive upward of $10 billion - and possibly as much as $15 billion - over two years -- funds that will help close the state's budget gaps. Such federal relief will help states maintain their spending and prevent spending cuts or tax increases, both of which would have intensified the downward economic spiral.
A year ago, Congress and the Bush administration agreed to a $150 billion stimulus package that consisted largely of tax rebates. Most economists now agree that last year's stimulus was not up to the task because tax cuts provide less "economic bang for the buck" than most other forms of stimulus. Economic forecaster Mark Zandi, a former advisor to presidential candidate John McCain, estimates that every dollar in tax cuts generates only $1.01 in economic activity, much lower than the spending impact of increasing unemployment compensation ($1.63), state fiscal relief ($1.38) or spending on infrastructure ($1.59). Also, since the tax rebate checks were sent out in May and June, when gasoline prices were skyrocketing, many recipients spent the money to cover their gas costs.
The magnitude of a proposed second stimulus has mounted steadily since last September's financial market meltdown and the ensuing sharp collapse in the consumer spending that accounts for 70 percent of demand in the economy. The spending collapse was compounded by a credit market freeze as Wall Street firms and banks confronted a mountain of bad debts created by high-risk lending and unregulated gambling. The crash of the housing and stock markets destroyed literally trillions in home equity and retirement savings held by millions of middle class households. Along with steadily mounting job losses, this caused households to sharply reduce spending. The collapse of consumer spending is thought to have pulled GDP down by as much as 5 percent during the fourth quarter of 2008.
It is no exaggeration to say that this is the worst economy since the Great Depression. The 2.6 million jobs lost in 2008 were more than in any year since 1945. Overall unemployment could be 9 percent by the end of the year and 11 percent in 2010 in the absence of the recovery plan, according to economist Zandi. Already, unemployment among adult black men is 13.4 percent. Housing prices have fallen 25 percent on average. There were 2.25 million home mortgage foreclosures last year, and one out of every six homeowners owes more on their mortgage than their house is worth.
The proposed American Recovery and Reinvestment Plan is a 21st century version of a government-led recovery and investment program, combining some of the best elements of the Depression-era Works Progress Administration, the Eisenhower era commitment to build the Interstate Highway System, the Apollo Project, and the Great Society. The plan includes spending that will not only provide some short-term stimulus but will increase the long-term productive capacity or efficiency of the economy.
One of the biggest components is $52 billion for various "green jobs" programs from weatherizing public buildings (see related story) and homes to reduce energy demand, to developing a "smart" electric power grid that is both more reliable and better able to transmit clean, renewable energy.
The package would also create jobs by spending $67 billion for infrastructure. Because of the urgent need to boost jobs as quickly as possible, it emphasizes "shovel ready" projects, including mass transit systems, highways, bridges, airports, national parks, water and sewer systems, flood control, and environmental cleanup. The Metropolitan Transit Authority will be able to use some of these monies to fund some of the construction projects and equipment needs in its capital budget. Governor David Paterson submitted an extensive list of 1,922 "ready-to-go" projects to the Obama transition team.
This second stimulus package provides $12 billion to support forward-looking research and development investments that could be particularly important in the future, including biomedical, climate change and alternative energy research, and funds to modernize and expand government and university research facilities.
The ARRP includes $5 billion for job training and employment services, including $1.2 billion to create 1 million summer jobs for youth. It offers additional -- and substantial funds -- for worker training and education as part of the education, healthcare, and science and technology initiatives. There is $5 billion for early childhood development, including additional slots in subsidized childcare and Head Start.
A particularly critical part of ARRP is aid to the unemployed. The program includes $36 billion to extend and modestly increase unemployment benefits, and incentives to encourage states to expand unemployment insurance coverage for low-wage and part-time workers. An additional $30 billion would subsidize health coverage for unemployed workers and provide 100 percent federal funding (i.e., dropping the requirement for a state match) for two years for Medicaid-eligible workers who become unemployed.
Nearly $30 billion would go to increase food stamps, low-income heating assistance, assistance provided under federal Supplemental Security Income, aid for the homeless and Temporary Assistance for Needy Families block grants. A total of more than $11 billion would fund repair and modernization of public housing, help communities build and rehabilitate low-income housing using green technologies, and enable communities to purchase and rehabilitate foreclosed and vacant properties.
New York's unemployed workers, their families, the state government and local governments and the broader New York economy will benefit significantly from this much-needed and unprecedented economic recovery plan. New York, though, must make sure that the billions of federal dollars it will receive for infrastructure, energy development and other projects lead to the creation of good jobs that provide decent wages, benefits and career development opportunities. This plan also presents New York with a golden opportunity to develop a strategic plan to revitalize the upstate economy and help the downstate economy adjust to a permanently smaller role for the finance sector.
The Obama team has suggested ways to use some of the remaining funds from the $700 billion Emergency Economic Stabilization Act, the so-called "bailout" that was passed in early October, to address the housing crisis. In a Jan. 15 to Congress, Larry Summers, who is to be director of the National Economic Council, indicated the new administration would commit $50 billion to $100 billion to "reduce the number of preventable foreclosures," reform bankruptcy laws, revamp the modest Hope for Homeowners program, and require banks receiving bailout assistance to "implement mortgage foreclosure mitigation" programs.
These measures can only help but may well not be sufficient to ensure that banks renegotiate mortgages on the scale necessary to halt the slide in housing prices. Until that happens, housing prices may fall further and the value of the mortgages and mortgage-backed assets that dominate the balance sheets of the major financial institutions will remain questionable. Investor's suspicions about the "toxicity" of these assets have paralyzed credit markets for most of the past year.
Originally, the $700 billion financial "bailout" was supposed to take those toxic assets off the hands of the banks, under the Trouble Asset Recovery Program or TARP. Some of the remaining $350 billion could be used for this. Now, though, the incoming Obama administration appears to be considering whether to provide another round of massive funding ($1 trillion or more) to salvage bank portfolios.
Given the magnitude and character of the federal interventions so far, the banking system already has been effectively nationalized and is "private" in name only. While the government has allowed bank executives to remain in control, at some point, Washington leaders will have to decide whether taxpayers might be better served by completing the nationalization of the banking system rather than trying to revive banks that have impaled themselves on massive amounts of toxic assets. To date, the overall magnitude of taxpayer resources pledged to financial market rescue can only be described as "galactic" -- $7 trillion to $8 trillion in capital infusions, low-interest loans and federal guarantees.
Along with the dual collapse of the housing and financial markets, the middle class squeeze played a major role the current economic precariousness. Wages have not kept pace with productivity or with the health and retirement security costs employers have shifted to workers. As a result, the average working family has been forced to take on substantial home equity or credit card debt in recent years to try to maintain living standards. The absence of a firm foundation for middle class prosperity meant that economic growth from 2003 to 2007 was possible only because of the economy's bubble tendency and the excessive reliance on borrowing at every level.
Boosting the middle class through higher wages and increased economic security involves such things as passage of the Employee Free Choice Act that will remove barriers imposed by the current labor law system that frustrate workers' efforts to join unions.
The American Recovery and Reinvestment Program is an essential step for the U.S. to take in pulling the economy out of this historic slump. As the House leadership's version of ARRP is negotiated in the House and with the Senate, it is critical that the provisions aiding states and low-income populations remain the centerpiece and that any business tax cuts be limited. To achieve a balanced and long-lasting prosperity, however, other actions will be needed to resolve the housing crisis and to rebuild the middle class. Without such policies, the recovery and reinvestment plan might create a short-term rebound but one that will fizzle out after two or three years.
The new administration gives every indication that it is aware of the need for these complementary actions. Time will tell whether it can achieve initial success on the economic recovery front and build the political support to turn recovery into sustained prosperity. More HERE
