Stimulus Package 2009: Lightning Round Reactions

January 16, 2009 by  
Filed under Economics, Taxes

The Democrats in the House of Representatives introduced legislation this week containing $825 billion in new tax credits and government spending, packaged together in what they call the “American Recovery and Reinvestment Plan.”  I grabbed an executive summary of the Plan from Speaker Pelosi’s website so that I could share some quick reactions to the Plan.

Name:  “American Recovery and Reinvestment Plan.”   Shorten it to “ARRP” and it looks and sounds like “AARP.”   Since I’m a baby boomer, maybe that’s a good omen.

$10 billion for science facilities, research, and instrumentation—to focus American brainpower on solving the energy and climate challenges and finding cures and treatments for diseases.  Although Pelosi promises no earmarks, this has education industry pork written all over it.  On top of that, I’m afraid the global warming contingent will suck all of the life out of this money.

$6 billion to expand broadband Internet access so businesses in rural and other underserved areas can link up to the global economy.   I hope that this doesn’t mean spending $10k per new broadband user.

$32 billion to transform the nation’s energy transmission, distribution, production and storage systems by allowing for a smarter and better grid to transmit renewable energy, and new advanced battery technology to power fuel-efficient, low-emissions vehicles.  This I like.  I want access to improved electric vehicle technology for a lot of reasons, not the least of which is to stick it to OPEC.

More than $20 billion in tax cuts for clean, renewable energy including a new enhanced tax credit for research and development focusing on smart energy conservation, energy efficiency, and renewable energy, and a multi-year extension of the production tax credit for wind, hydro, geothermal, and bioenergy.  Ditto.  Go to hell OPEC.

$16 billion to repair public housing and make key energy efficiency retrofits.  I’m not seeing how this benefits anyone in the long run.  I’d rather see those folks get out of public housing and into something better overall.

$6 billion to weatherize modest-income homes.  This I like.  Makes home living more affordable, helps with energy independence, puts lots of people to work.

$32 billion in transportation, of which $30 billion is for highway construction.  Big time pork alert.  On top of that, the road builders already control a lot of state legislatures, including ours.

$31 billion to modernize federal and other public infrastructure with investments that lead to long term energy cost savings.  Sounds like we’re preparing to support more government workers.  Bad idea.

$19 billion for clean water, flood control, and environmental restoration investments.  Another pork alert.  Now if we could use this money to move everyone out of that geographic and environmental disaster known as New Orleans, that would be OK.

$10 billion for transit and rail to reduce traffic congestion and gas consumption.  You know that all of this is going to big cities in the big states.  Not interested.

$41 billion to boost learning in local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).  If we have learned anything about public education in recent years, it’s that throwing more money at public schools does not produce better students.

$79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities and $15 billion to states as bonus grants for meeting key performance measures.  Terrible idea.  The taxpayers in states that have acted responsibly with their budgets get to bail out places like California, New York, and New Jersey.  If that happens, they should let us all vote for the next governor of California.  Arnold has to go.  On top of that, college faculties hate having their performance measured so they will dilute the value of this to zero.

$25 billion to states for other high priority needs such as preventing the layoffs of public safety and other critical employees including teachers.  Ditto.  Pay for your own stuff California.

$21 billion in school modernization.  This is too vague to understand.  That means pork.

Making college more affordable through tax credits for college tuition for up to $2,500 per year of school and increasing the PELL grant by $500.  I have a son in college but I’m confident that none of this money will flow to me.

Refundable tax credit of $500 per worker and $1,000 per couple, phasing-out at $200,000 for a couple.  Won’t help me.  In fact, I’m expecting a tax increase to pay for this.

Expand the number of families who can access the Child Tax Credit, and the Earned Income Tax Credit.  The tax code is already way too complex.  This just adds to it.

The Net Operating Loss Carryback provision gets cash flowing immediately to businesses during this credit crunch, allowing them to write off current losses against past profits up to 5 years (instead of just 2).  Good idea – helps small business.

Bonus Depreciation provides immediate tax relief for businesses investing in new plants and equipment by speeding up depreciation deductions.  As long as some of these are manufacturing plants so we can stop the flow of jobs to China, I’m OK with this.

Extending Small Business Expensing allows the doubling of the amount small businesses can immediately write off on their taxes for capital investments and for purchase of new equipment.  Great idea.  Small business is the lifeblood of our economy and putting resources here creates jobs in the most efficient manner.  No unions involved either.

Providing businesses with a tax credit for hiring disconnected youth and veterans, and delaying withholding tax on government contractors provides small businesses with relief.  If we can put more veterans into good jobs, all for it.  I don’t know what a “disconnected youth” is but I’m guessing I don’t want to hire one, tax credit or not.

A First-time Homebuyer Incentive repeals the payback requirement on this tax credit, and the proposal makes grants to states for low-income housing.  Homebuyer incentives don’t work.  Haven’t we learned that by now?  Either they can afford to buy a house or not.  Incentivizing the purchase doesn’t change that.

Reinvigorating the Market for State and Local Government Bonds will get local projects moving, and provides tax credit and exempt bonds to areas hurt by the recession.  This is vague but I am suspicious that it means federal guarantees of state and local bond issues.  Oh Oh.  More help for those pathetically bad politicians in California.  Can we move the people out, start the earthquake, and just get it over with?

$20 billion for health information technology to prevent medical mistakes, provide better care to patients and introduce cost-saving efficiencies.  Like it.  Let’s get Google involved.  They can do this faster and cheaper than anyone.

$4 billion to provide for preventative care and to evaluate the most effective health care.  Vague – how will this be done?

Provide extended unemployment benefits through 2009, modernize unemployment benefits and strengthen job training.  “Modernize” unemployment benefits?  That sounds like “increase” benefits.  Find them jobs instead.

$39 billion to help those who lose their jobs pay the cost of keeping their employer-provided health care under COBRA and providing short-term options to be covered by Medicaid.  COBRA is ridiculously expensive to begin with.  I don’t see this as an effective solution to the health care problem.

Increase the food stamp benefit by over 13% to help offset rising food costs.  Why is this even in the Plan?  It’s just an increase in welfare benefits, which should be separately debated.

$87 billion for a temporary increase in the Medicaid matching rate.  Medicaid is a long term problem unrelated to this economic crisis.  This is an over-sized bandage for something that should be addressed separately.

$4 billion for state and local law enforcement funding.  Another bailout of incompetent spendaholic state and local politicians.

Those are my quick hits on the 2009 stimulus package.  After the bill works its way through committees and senate-house conference, I will look at the bill itself for further analysis.

What are your immediate reactions to this proposed stimulus spending?

Image credit:  Lynne Lancaster


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18 Responses to “Stimulus Package 2009: Lightning Round Reactions”
  1. My Journey says:

    My immediate reaction is the same to any spending bill – WHERE ARE THE GOV’T AUDITORS! $100bil or so random construction jobs (regardless of industry)…how much are we going to lose B.S.!

    Pisses me off to no end.

    Putting in $100bil into infrastructure may or may not be a good idea, but putting $100bil into infrastructure and only receiving $60bil of value is unacceptable

  2. TMN says:

    “$10 billion for transit and rail to reduce traffic congestion and gas consumption. You know that all of this is going to big cities in the big states. Not interested.”

    Given that well over half our population lives in the “big cities”, and that drastically increased population density makes mass transit much more effective (more bang for the buck), I’m surprised you dismiss this so easily. The quickest way to start reducing our reliance on OPEC is to transition people to mass transit, and it makes perfect sense to start with the most dense population centers. You may not ride the light rail yourself, but if we can shift 5-10% of solo car drivers in metro areas over to a mass transit system, you’ll certainly see benefits in energy prices and foreign dependence.

  3. My Journey: All I can say is that Pelosi promises a special 7-person oversight board for this money. Unfortunately, this may be an incestuous oversight board.

    TMN: Don’t get me wrong. I like mass transit. I want some in our city of 1 million. We don’t have any except buses. That’s why I am afraid that all of the money will go to expand existing systems, not put new systems where they are needed.

  4. Nancy says:

    Ugh. I look at this and see a lot of money pouring into the auto, medical and housing industries. Just more bailouts.

    However, building out mass transit is a good idea because private industry just cannot/will not do that.

  5. Brian says:

    “$10 billion for transit and rail to reduce traffic congestion and gas consumption.” Then when consumption is reduced jack up the federal excise tax rate for gas because revenue from the tax is less.

  6. Adam says:

    Meh, you take the good with the bad.

    I like some of the provisions (especially the energy-related ones), and don’t like others. Realistically, there is no way that California won’t be bailed out by the federal government.

    This strikes me as slightly less incompetent than most government endeavors.

  7. Dorothy says:

    As always, insightful and thoughtful. I agree that Medicaid and Food stamps should be debated separately. I’m especially interesed in improving health information technology. It’s long overdue.

  8. kitty says:

    I agree with most of the above. Refundable tax credits is what I hate most and not only because I am “too rich” to get anything. I just don’t see how giving someone $500 is going to do anything but provide at best a one better quarter for retailers. Even this is not likely, but this is the best they can hope for.

    I like help to states, but only because living in NY and owning a couple of NY municipal bonds I am in “special interest” group. After all, either I pay the government to help states or I pay the state of NY. I’d imagine had I lived somewhere else, I’d not be too happy about this provision.

    I like mass transit. We’ll need to wait and see if they plan to only improve existing system like NYC or build new systems.

    I am very interested in investments in science and technology. I am not sure about health information technology. I agree that it is a good thing; it is likely to benefit my employer – a Fortune 500 technology company that invests a lot in research. What I am not sure about is how receptive medical offices will be to it and how effective it’ll be. I read a couple of medical blogs and the doctors aren’t very receptive to the idea. One concern is privacy. Certainly the technology is there, but many medical systems today don’t use it. This is purely anecdotal information, but I heard a developer specializing in medical systems complain that hospitals often refuse to pay for implementation of role-based access control and encryption.

    “$4 billion to provide for preventative care and to evaluate the most effective health care. ”
    Not only it is vague, it has also not been shown to be cost-saving, at least when you look beyond basic lifestyle measures. A number of studies showed that preventive care is actually quite expensive: you need to treat or screen hundreds, sometimes thousands of people to benefit one person. For example, treating 250 people with statins for 5 years to prevent one heart attack is not money-saving. I am not arguing against preventive care as many measures has been shown to save lives. But it is not the answer to health care costs. If anything, it adds to health care costs, especially when one looks at some NON-recommended tests ordered in over 50% of annual checkups.

  9. MasterPo says:

    All these “investments” (shot-gun style spending is not an investment!) will take YEARS to bear fruit, if at all.

    As for the building and construction stuff – that is destined to fail miserably. It’s a 1910′s approach to a 21st century economy. The vast majority of high paying, career jobs in the U.S. today are white collar technology and/or services. Not shoveling asphalt or laying bricks. Construction jobs will do NOTHING to help the 40 y/o CPA or software engineer out of work.

  10. Valorie Tunstall says:

    what about the disabled? what about the programs for them? or dont they matter to the government?

  11. Derek says:

    number 10… the disabled dont matter, they already have gov. aid.. is called disability, and if you dont qualify, get a job…. first off i would like to say the only thing the gov. needs to focus on is creating more jobs, not pumping money into the economy.. 500 dollars wont do jack for me… pay my rent for one month in my overly priced house in bfe kansas…. or pay off my christmas loans… wont do didly, we need to focus on jobs…. the other major issue is the interest rates for people like me that dont exist, they are an outrage… if i pay 10 dollars more than the min. payment on a credit card.. my bill will go up… focus on the real problems.. and last, the mass transit that everyone appears to be interested in, why doesnt gm do that? they can get return profit for the cost to transport the people, and maybe actualy make a impact on america that has so miserably failed me my 22 years of life… they should def. invest in new stuff other than cars…

  12. My Journey says:

    ” first off i would like to say the only thing the gov. needs to focus on is creating more jobs, not pumping money into the economy”

    I am not a huge fan of it, but it is called Keynsian Economics based on a economist in the early 1900′s named…Keynes. Google it. It is what the new deal was based on.

    “the other major issue is the interest rates for people like me that dont exist, they are an outrage… if i pay 10 dollars more than the min. payment on a credit card.. my bill will go up… focus on the real problems”

    What are you talking about? Do you think the gov’t should be involved in your CC bills? Obama should call up Visa and ask to lower your interest rate?

    “and maybe actualy make a impact on america that has so miserably failed me my 22 years of life”

    Well from your writing (both style and content) maybe it isn’t America that failed you, but rather you failed yourself. Take charge of your life and read a few more of Tough Money’s Posts maybe it’ll….”toughen” you up and you’ll stop bitching(pun intended)

    How’s that for Tough Money Love lol

  13. My Journey: You are tough – I don’t want you getting up in my grill!

  14. My Journey says:

    I just get annoyed because you write a well thought out article and in response you get someone bitching (in more or less broken English) about their situation without any regard macroeconomic factors.

    I don’t mean to attack, and if it was a simple lack of understanding as to Keynesian Economics, I would have left it at that…but to say American failed him because his CC bills are too high is just ridiculous.

  15. Kevin says:

    Thank you for posting this info.

    I AM SICK OF BAILING EVERYONE OUT.

  16. Paula says:

    I have read thru this and many others and again I see nothing nowhere for the people on SSDI that are disabled. Do we get a raise or what? President Obama did you forget us?

  17. YES – I’m afraid my man Obama forgot us – o where is there monies towards for subsidized apartments and low-income homes for the disabled; something so necessary to get the disabled out from under high rents to live in safe and supportive communities.

    I’ve been on SSDI for 10+ years – I have a nasty reoccurring bought with bi-polar disorder. Even though I maintained a high paying work history prior to going on SSDI, my once new car now is ready for the grave, my SSDI check barely covers my nice apartment with all the other expenses attached. I’m able to pick up additional income, but then the monthly amount I have to pay back to Medicaid for medical and prescription coverage goes from $130 to $150 to $200 a month because I’m making too much above poverty level. Oh and the $175 in monthly food stamps disappear with the added income.

    When I did the math, looking at the money I actually bring in after taxes and SS, it is about a wash – so the disabled get it no matter which way we turn our derrières. OBAMA HEAR OUR CRIES………..

  18. Bob says:

    This is socialism … how do you give tax refunds to non performers who pay no taxes that is NOT a refund. When will the govt give productive ppl some rewards and stop rewards non productive people…
    You forgot $93,000 in salaries and benefits for every Senator and Congressman..why didn’t they stop that increase ? I was counting on good ol Barney Frank, Dodd and Pelosi ?
    Increasing welfare food stamps how is that an incentive plan ??
    HOW ABOUT NO MORE FEDERAL INCOME TAX FOR THSOE THAT ACTUALLY WORK FOR A LIVING FOR ONE YEAR PERIOD… NOW THATS AN INCENTIVE..

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