Highlights of Stimulus Plan

[Texas]

Reid stated that this will stimulate the economy and produce 3.5 million new good paying jobs. What do you think?

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/11/AR2009021103678_pf.html

By The Associated Press
The Associated Press
Wednesday, February 11, 2009; 10:10 PM



-- Highlights of a nearly $789 billion compromise version of President Barack Obama's economic recovery plan agreed to by Democrats and moderate Senate Republicans. Additional debt costs would add about $330 billion over 10 years. Many provisions expire in two years.

___

Spending

AID TO POOR AND UNEMPLOYED

_ $40 billion to provide extended unemployment benefits through Dec. 31, and increase them by $25 a week; $20 billion to increase food stamp benefits by 14 percent; $3 billion in temporary welfare payments.

DIRECT CASH PAYMENTS

_ $14 billion to give one-time $250 payments to Social Security recipients, poor people on Supplemental Security Income, and veterans receiving disability and pensions.

INFRASTRUCTURE

_ $46 billion for transportation projects, including $27 billion for highway and bridge construction and repair; $8.4 billion for mass transit; $8 billion for construction of high-speed railways and $1.3 billion for Amtrak; $4.6 billion for the Army Corps of Engineers; $4 billion for public housing improvements; $6.4 billion for clean and drinking water projects; $7 billion to bring broadband Internet service to underserved areas.

HEALTH CARE

_ $21 billion to provide a 60 percent subsidy of health care insurance premiums for the unemployed under the COBRA program; $87 billion to help states with Medicaid; $19 billion to modernize health information technology systems; $10 billion for health research and construction of National Institutes of Health facilities.

STATE BLOCK GRANTS

_ $8 billion in aid to states to defray budget cuts.

ENERGY

_ About $50 billion for energy programs, focused chiefly on efficiency and renewable energy, including $5 billion to weatherize modest-income homes; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called "smart electricity grid" to reduce waste; $13.9 billion to subsidize loans for renewable energy projects; $6.3 billion in state energy efficiency and clean energy grants; and $4.5 billion make federal buildings more energy efficient.

EDUCATION

_ $47 billion in state fiscal relief to prevent cuts in state aid to school districts, with great flexibility to use the funds for school modernization and repair; $26 billion to school districts to fund special education and the No Child Left Behind law for students in K-12; $17 billion to boost the maximum Pell Grant by $500 to $5,350; $2 billion for Head Start.

HOMELAND SECURITY

_ $2.8 billion for homeland security programs, including $1 billion for airport screening equipment.

LAW ENFORCEMENT

_ $4 billion in grants to state and local law enforcement to hire officers and purchase equipment.

___

Taxes

NEW TAX CREDIT

_ Approximately $115 billion for a $400 per-worker, $800 per-couple tax credits in 2009 and 2010. For the last half of 2009, workers could expect to see perhaps $13 a week less withheld from their paychecks starting around June. Millions of Americans who don't make enough money to pay federal income taxes could file returns next year and receive checks. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.

ALTERNATIVE MINIMUM TAX

_ About $70 billion to spare about 24 million taxpayers from being hit with the alternative minimum tax in 2009. The change would save a family of four an average of $2,300. The tax was designed to make sure wealthy taxpayers can't use credits and deductions to avoid paying any taxes. But it was never indexed to inflation, so families making as little as $45,000 could get significant increases without the change. Congress addresses it each year, usually in the fall.

EXPANDED COLLEGE CREDIT

_ About $13 billion to provide a $2,500 expanded tax credit for college tuition and related expenses for 2009 and 2010. The credit is phased out for couples making more than $160,000.

HOMEBUYER CREDIT

_ $3.7 billion to repeal a requirement that a $8,000 first-time home buyer tax credit be paid back over time for homes purchased from Jan. 1 to August 31, unless the home is sold within three years.

BONUS DEPRECIATION

_ $5 billion to extend a provision allowing businesses buying equipment such as computers to speed up its depreciation through 2009.

AUTO SALES

_ $2.5 billion to makes sales tax on paid on new car purchases tax deductible

.

 

[FlamingMoe]

I think no matter what the bill contains, more than a quarter of a million dollars per job created is just a waste.

 

[Puppycow]

IOW it really costs $789 billion + $330 billion (=1.119 trillion?)

Somebody double check my calculations, but that seems to work out to over $300,000 per job. (Using Reid's 3.5 million figure). We also get some new and improved infrastucture as well as those jobs.

It also depends on what would have happened if there had been no stimulus. I don't think anyone really knows that, but different schools of economics have different theories I suppose. This may be necessary to break out of a vicious deflationary cycle.

And, regarding that debt, some portion of it may simply be paid with new money, not money taken from taxpayers. I believe the techical term is "quantitative easing," and the colloquial is "printing money." That's bad when you have high inflation, but it might be exactly what we need if deflation is the problem.

 

[FlamingMoe]

I went with the last firm figure I heard, $819,000,000,000.

Also, so this "stimulus" package is supposed to have all this money in it for infrastructure and building construction, right? The issue I've never heard discussed is this: who's been getting laid off, and do they have any fricking idea how to raise a building or lay pavement? All those investment bankers on Wall Street who got kicked to the curb aren't likely to be able to just mosey on over to a foreman and say, "okay, Boss, gimme a hammer I'm ready to help!"

 

[Texas]

IOW it really costs $789 billion + $330 billion (=1.119 trillion?)

Somebody double check my calculations, but that seems to work out to over $300,000 per job. (Using Reid's 3.5 million figure). We also get some new and improved infrastucture as well as those jobs.

It also depends on what would have happened if there had been no stimulus. I don't think anyone really knows that, but different schools of economics have different theories I suppose. This may be necessary to break out of a vicious deflationary cycle.

And, regarding that debt, some portion of it may simply be paid with new money, not money taken from taxpayers. I believe the techical term is "quantitative easing," and the colloquial is "printing money." That's bad when you have high inflation, but it might be exactly what we need if deflation is the problem.

You made good points except for the inflation part. Just remember this bill is just a "down payment" The next shoe to drop is Tarp2 and that is completely financed by printed money and is at leas 2 trillion bucks on top of the 1,5 trillion already in the pipeline. We are setting up a scenario of hyper inflation within a decade if not sooner. We are dealing with numbers that are impossible to even imagine. What happens when we have another Katrina, 911, or war? For the first time in my almost 70 years I am seeing the credit rating of US debt seriously being questioned.

 

[Texas]

I went with the last firm figure I heard, $819,000,000,000.

Also, so this "stimulus" package is supposed to have all this money in it for infrastructure and building construction, right? The issue I've never heard discussed is this: who's been getting laid off, and do they have any fricking idea how to raise a building or lay pavement? All those investment bankers on Wall Street who got kicked to the curb aren't likely to be able to just mosey on over to a foreman and say, "okay, Boss, gimme a hammer I'm ready to help!"

Only 5%, 46 billion, of the plan is for infrastructure according to this summary.

 

[Puppycow]

You made good points except for the inflation part. Just remember this bill is just a "down payment" The next shoe to drop is Tarp2 and that is completely financed by printed money and is at leas 2 trillion bucks on top of the 1,5 trillion already in the pipeline. We are setting up a scenario of hyper inflation within a decade if not sooner. We are dealing with numbers that are impossible to even imagine. What happens when we have another Katrina, 911, or war? For the first time in my almost 70 years I am seeing the credit rating of US debt seriously being questioned.

Here in Japan we have yet to see hyperinflation. Remember, Japan went through all of this in the 90's. Japan's debt-to-GDP ratio is much higher than that the US, even after all of this stuff kicks in.

 

[Texas]

Here in Japan we have yet to see hyperinflation. Remember, Japan went through all of this in the 90's. Japan's debt-to-GDP ratio is much higher than that the US, even after all of this stuff kicks in.

Yes and it is called the lost decade. I am no economist but all I have heard for the last year from economists is that "we have to do something" but even they admit they don't have any idea what that "something" is. We truly are in uncharted water here and this bill doesn't even begin to address the problem simply because the damn problem is too big for even the government to solve since we have no idea how long the rest of the world is willing to buy our debt at 0% return.

 

[Puppycow]

Yes and it is called the lost decade. I am no economist but all I have heard for the last year from economists is that "we have to do something" but even they admit they don't have any idea what that "something" is. We truly are in uncharted water here and this bill doesn't even begin to address the problem simply because the damn problem is too big for even the government to solve since we have no idea how long the rest of the world is willing to buy our debt at 0% return.

Indeed, but Japan's "lost decade" was still a lot better than the Great Depression. It may be that all that government spending prevented things from being worse. Things could always be even worse.

The point remains, though: "lost decade" or no, there was no inflation, and there is no inflation, much less hyperinflation.

Here's one reason why I think that even if the Fed spends another 2 trillion recapitalizing the banks, that we won't see inflation.

U.S. Homeowners Will Lose Up to $10 Trillion, Talbott Estimates

Interview by James Pressley

Feb. 12 (Bloomberg) -- John R. Talbott, a former Goldman Sachs banker, calls himself both an optimist and a realist. When it comes to U.S. housing, the realist has the upper hand.

His new book, “Contagion,” predicts that prices are only halfway through a potential decline that will see homeowners lose up to $10 trillion. Values will fall for four to five more years, he says, as defaults move from subprime to prime mortgages.

When I reviewed the book last week, some readers called the author courageous. Others accused him of being a doomsayer. I put their questions to Talbott, 54, in a telephone interview.

Pressley: Are you spreading doom and gloom?

Talbott: While I’ve been an optimist all my life, I’m also a realist. And for the past five or six years, I’ve been painting a fairly ugly story about how bad this might get.

Pressley: One reader suggested that you’re understating the price decline. He says homes that fetched $225,000 to $275,000 in Lee County, Florida, three years ago now sell for about $40,000, which he calls 1970 to 1980 prices.

Talbott: He makes a good point. The national average of home prices is already off 23 percent to 24 percent. But realize that this is an average and that the epicenter is primarily in California and Florida, with Phoenix and Las Vegas thrown in. You are going to see areas that are off at least 50 percent and I wouldn’t be shocked to find cities that are off 60 to 65 percent.

Back to 1997

Pressley: You say real prices should return to average 1997 levels, adjusted for inflation. Why 1997?

Talbott: I’m trying to get back to a more normal time -- before the explosive growth in home prices, before the crazy bank financing, and -- oh, yes -- before the Internet bubble.

Pressley: The greatest price appreciations during the boom were in America’s wealthiest cities, you say.

Talbott: It’s striking. Middle-income homes in the middle of the U.S. still sell for $100,000 to $150,000. Louisville barely beat the consumer price index over the past 20 to 30 years. Your wealthy cities -- San Diego, Manhattan, Miami, Beverly Hills --went up three- and four- and five-fold in real terms.

Pressley: You predict homeowners will lose $8 trillion to $10 trillion. How so?

Talbott: There was at the 2006 peak about $25 trillion of residential home value. Today, that’s off almost 25 percent. That takes it down to the $18 trillion range, which is a $7 trillion loss. But in a deep recession, home prices might trade even lower than fair value given the high unemployment that exists.
. . .

 

[Texas]

Indeed, but Japan's "lost decade" was still a lot better than the Great Depression. It may be that all that government spending prevented things from being worse. Things could always be even worse.

The point remains, though: "lost decade" or no, there was no inflation, and there is no inflation, much less hyperinflation.

Here's one reason why I think that even if the Fed spends another 2 trillion recapitalizing the banks, that we won't see inflation.

Here's my problem. No matter what the business cycle has never been defeated. Every attempt to interfere has only made downturns more severe and long lasting. The free market is truly a Darwinian concept and when left alone the weak fail and the strong survive. If a bank is too large to fail and is failing then it should fail and if an industry or company has brought itself to bankruptcy then let it become bankrupt and if possible re-emerge stronger or be liquidated. Recessions are 99% psychological and self-fulfilling prophecies. The government can only prolong the inevitable and when that government is telling us that we are collapsing then no matter how much money it pumps into the system the positive psychological impact of any stimulus is negated by the more powerful emotion of fear that is being conveyed. I just looked ate the Asian markets and all are down about 4% and the US futures are tanking. I don't know the answers but I do know that smarter people than me are voting with their money.

 

[332nd]

I went with the last firm figure I heard, $819,000,000,000.

Also, so this "stimulus" package is supposed to have all this money in it for infrastructure and building construction, right? The issue I've never heard discussed is this: who's been getting laid off, and do they have any fricking idea how to raise a building or lay pavement? All those investment bankers on Wall Street who got kicked to the curb aren't likely to be able to just mosey on over to a foreman and say, "okay, Boss, gimme a hammer I'm ready to help!"

The funny part is...

a) You're assuming that with the housing crisis being the main target for finger pointing, that there are a bunch of builders that still have work.

b) You're assuming that investment bankers came from "investment baker families".

c) You're assuming that building roads/buildings means that every one on the site knows how to do it.

d) It's just funny to me because I have an MFA in acting... ACTING... yet I grew up, mixing mortar, hauling brick, building dead men, (odd, I've never heard the plural for that.) and laying brick/stone.

Why is it investment bankers couldn't do that?

 

[KoihimeNakamura]

Because it's easier to throw out nonsense points about something rather than think about it, lately.

(Also, the construction market is pretty much gone in most places. As Redtail said the real estate markt imploding stopped it cold)

 

[Texas]

The funny part is...

a) You're assuming that with the housing crisis being the main target for finger pointing, that there are a bunch of builders that still have work.

b) You're assuming that investment bankers came from "investment baker families".

c) You're assuming that building roads/buildings means that every one on the site knows how to do it.

d) It's just funny to me because I have an MFA in acting... ACTING... yet I grew up, mixing mortar, hauling brick, building dead men, (odd, I've never heard the plural for that.) and laying brick/stone.

Why is it investment bankers couldn't do that?

Nice army of strawmen. Here is the awful truth. There will be no 3.5 million jobs created when the only job producing programs make up less than 20% of the package and even if 100% was devoted to jobs each job would cost over 250,000 bucks. The only way to create the 3.5 million "good paying" jobs that Reid promises is in producing enough lipstick to put on this pig.

 

[KoihimeNakamura]

Nice army of strawmen. Here is the awful truth. There will be no 3.5 million jobs created when the only job producing programs make up less than 20% of the package and even if 100% was devoted to jobs each job would cost over 250,000 bucks. The only way to create the 3.5 million "good paying" jobs that Reid promises is in producing enough lipstick to put on this pig.

You know. When your house is on fire? You don't stop to question your neighbor how much the water costs. You throw the water on the house.

(Besides, I love how you can state with such absolute truth, even calling a logical argument a strawman. HINT: We aren't saying you have those arguments, so they aren't strawmen. Fail.)

 

[lupus_in_fabula]

Here's my problem. No matter what the business cycle has never been defeated. Every attempt to interfere has only made downturns more severe and long lasting. The free market is truly a Darwinian concept and when left alone the weak fail and the strong survive. If a bank is too large to fail and is failing then it should fail and if an industry or company has brought itself to bankruptcy then let it become bankrupt and if possible re-emerge stronger or be liquidated.

I guess it depends on the scale of the economy in question. For instance Sweden and especially Finland had a severe recession in the beginning of the 1990s; Finland's trade relied too much on selling overpriced crap to the Soviet Union, hence when it collapsed, so did eventually the banking sector (also due to mismanagement and stupid risk taking). But it is argued that governmental actions were necessary in order to drag Finland up from depression quickly.

However, when talking about the U.S. economy, we're also talking about the largest economy in the world, which makes the whole situation much more difficult. Moreover, trade balance also seems to play a role here: whether a country is more or less dependent on export vs. import does make a difference. It seems to make more sense to stimulate the market – keeping companies who export alive via governmental stimuli (restructuring, keeping workforce active and guarantee money supply) as long as there's overall demand for what they export.

It might be the case that what saved Finland was that its economic situation was much worse that other countries, thus demand for Finnish exports never really collapsed. But again, the scale of the economy is not comparable to the U.S.

Recessions are 99% psychological and self-fulfilling prophecies. The government can only prolong the inevitable and when that government is telling us that we are collapsing then no matter how much money it pumps into the system the positive psychological impact of any stimulus is negated by the more powerful emotion of fear that is being conveyed. I just looked ate the Asian markets and all are down about 4% and the US futures are tanking. I don't know the answers but I do know that smarter people than me are voting with their money.

'Psychology' and 'self-fulfilling prophecies' are important factors. However, since highly developed countries have moved from manufacturing towards finance, those factors have also become much more important as a consequence. Maybe too important for the system to work properly in a self-sustaining way. In other words, their importance is at least to some parts relative to the overall structure of the economy. Hence we see companies facing bankruptcy even though they perform well.

The whole move from manufacturing towards financing has been part of deliberate policies too, which is often forgotten (the Reagan administration comest to mind). In the short term it could make sense, but in the long term... who knows? I wonder what would (or maybe will) happen if developing countries reach a much higher standard of living than today (with much higher wages)?

In short, policies do matter, although simply rescuing without restructuring might not.

 

[gdnp]

Yes and it is called the lost decade. I am no economist but all I have heard for the last year from economists is that "we have to do something" but even they admit they don't have any idea what that "something" is.

I don't know what economists you are reading. Every one that I have read has an opinion on what needs to be done. Nouriel Rubini thinks we need to nationalize the banks, for example. There may be disagreements about what needs to be done, but I have not heard a single economist state that they have no clue what is necessary.

Here's my problem. No matter what the business cycle has never been defeated. Every attempt to interfere has only made downturns more severe and long lasting.

This is a rather bold statement to make without any supporting evidence. I'm sure that a few libertarian economists hold this view, but they would seem to be in a distinct minority.

 

[Dr Adequate]

Nice army of strawmen. Here is the awful truth. There will be no 3.5 million jobs created when the only job producing programs make up less than 20% of the package and even if 100% was devoted to jobs each job would cost over 250,000 bucks. The only way to create the 3.5 million "good paying" jobs that Reid promises is in producing enough lipstick to put on this pig.

You have not demonstrated how you draw your conclusion from your figures.

 

[casebro]

I'd like to bring a breath of fresh air to this thread:

Us anti-AGWs warned you that Kyoto would ruin the economies of the world.

Or am I just blowing smoke?

 

[gdnp]

I'd like to bring a breath of fresh air to this thread:

Us anti-AGWs warned you that Kyoto would ruin the economies of the world.

Or am I just blowing smoke?

1) anti-AGWs warned that Kyoto would ruin the economies of the world
2) Kyoto passed, but the US refused to ratify and has not adhered to its provisions
3) A financial crisis that by most accounts began with the collapse of the US housing bubble has caused severe damage to world economies

ergo

4) The current economic crisis was caused by the Kyoto accords.

perhaps you have heard the expression "correlation does not prove causality"

ETA: as for blowing smoke, it sounds more likely to me that you are bogarting the joint.

 

[Meadmaker]

You know. When your house is on fire? You don't stop to question your neighbor how much the water costs. You throw the water on the house.

But it might be a good idea to check what's in the bucket before you throw it on the fire.