Back on December 18, 2008, I wrote an article that talked about Barack Obama’s $800 billion economic jumpstart package. At the time, some of the details were pretty sketchy, at least those that were being made available to the general public. Some of those details began coming out yesterday and from the looks of it, the package is going to be huge. Not only that, it is going to be quite different in makeup than the plan President Bush pushed through Congress in 2008.

One of the main differences is the way any tax credit or rebate would be distributed. Instead of checks being mailed out or money being direct deposited into taxpayer bank accounts, the money would come in the form of lower payroll deductions. I am very skeptical of any kind of plan like this. As I mentioned in my previous article, I am not sure President Bush’s plan actually helped anyone to have more money to buy things to help the economy. Most of it was probably used to help pay higher fuel costs. So with that in mind, the question begs to be asked. Just how much good is temporary lower payroll deductions going to do? At this point, it is being touted as a way to get money into the hands of consumers, trying to spark more spending, but the numbers that are being tossed around really don’t spark much enthusiasm on my part. From The Associated Press:

If the two-year plan is enacted, workers would see larger paychecks almost immediately because taxes withheld by the government would drop. The break would be retroactive to Jan. 1, and couples receiving a $1,000 tax cut would begin receiving an extra $40 in twice-monthly paychecks as the government tries to spark more consumer spending.

Obama’s proposal to stimulate the economy includes tax cuts of up to $300 billion – including $500 for most individuals and $1,000 for couples if one spouse is employed – as well as more than $100 billion for businesses, an Obama transition official said. The total value of the tax cuts would be significantly higher than had been signaled earlier.

New federal spending, also aimed at boosting the moribund economy, could push the overall package to the range of $800 billion or so. Some $77 billion would be used to extend unemployment benefits and to subsidize health care for people who have lost their jobs.

The rest would go toward job-creation projects such as roads and bridges and toward long-term goals such as alternative energy programs.

The Obama plan’s tax cuts for individuals and couples would be a bit different from the rebate checks sent out last year by the Bush administration and Congress in a bid to boost the slowing economy. The relief this time around would be awarded by withholding less from worker paychecks. That provision would cost about $140-150 billion over two years.

Again, I want to ask the question. Just how much good is a temporary lower payroll deduction going to do. If a couple gets $1,000 that is spread out with $40 per week extra on their paycheck, that is 25 weeks. Then the deductions will go right back to where they were to start with. It sounds like more of a bandaid to me, not a permanent fix.

One thing that sticks out to me about the package is the plan to provide more tax refunds for businesses. If these refunds will also go to small businesses, then I can see this part of the plan actually doing some good. It could give them the cash they need to make sure more jobs are not lost, especially if the economy gets much worse, before it gets better. From The Associated Press:

President-elect Barack Obama’s proposed stimulus package would provide businesses with billions of dollars in refunds on taxes they paid several years ago.The refunds are popular among business groups and could increase pressure on Republicans to support Obama’s massive stimulus package, even though most of them are wary of government spending increases that could send its total cost to $800 billion or more.”This gives companies an infusion of cash just when they need it,” Dorothy Coleman of the National Association of Manufacturers said of the proposed refunds.

Obama’s proposal to stimulate the economy includes tax cuts of up to $300 billion, including more than $100 billion for businesses.

The refund provision would enable some companies posting losses last year to get refunds for taxes paid as far back as five years earlier. The businesses could refile their old tax returns, using the losses suffered last year to offset profits made when times were good.

Under current law, businesses can use losses to offset profits the two previous years.

There is one other thing that bothers me about this entire scenario and that is the language we hear Obama and his people using.

“The economy is very sick,” said Obama, who met privately with leaders of both parties at the Capitol. “The situation is getting worse. … We have to act and act now to break the momentum of this recession.”

I am not so foolish to believe that our country is not in bad shape. President-elect Barack Obama seems to think it is pretty bad. Even though he will not talk about foreign policy problems, such as the conflict between Israel and Hamas, he has returned to Washington two weeks before his inauguration and began work on his economic plan. Word has it that he even plans to make a speech about the crisis, maybe as early as Thursday.

Everywhere we look, we see people in financial trouble, some of it through no fault of their own. I realize something needs to be done to stabilize our economy, but the words we are hearing are the same kind of words we heard when President Bush and Henry Paulson began trying to push their $700 billion bailout plan for Wall Street through Congress. The American taxpayer was continually informed that something had to be done right now and they used that fear to push through a package that has done nothing to help our economy. The banks that have received that money will not even disclose how they are spending it.

I have said over and over, anytime I am told something has to be done right now, if not sooner, then I get very skeptical. I start looking for the catch, trying to find the real truth in what they are saying. It is very suspicious that the economy seemed to go in the tank so quickly and I have heard that assessment from more than one person. How did it get so bad, so fast. Dominique, from An Unlikely Perspective 2 isn’t so sure the credit crisis isn’t a manufactured one and I am not so sure she isn’t right.

One of the concerns some of the Republicans in Congress are having about this plan is it’s cost. Some are afraid the cost will top the $775 billion some Obama aides have floated as the price tag. Suffice it to say, it isn’t going to be cheap. So, that leaves another question that needs an answer. How are we going to pay for all of this?

That’s my take!

Larry

Tags: Barack Obama, Congress, Economic Stimulus Package, Recession

This entry was posted on Tuesday, January 6th, 2009 at 6:36 am and is filed under News/Politics. You can follow any responses to this entry through the RSS 2.0 feed.