Your 2009 economic stimulus check will come in the form of a tax cut, not a physical check. How will Obama’s stimulus plan work to save our economy?
President Obama has taken on the economy as his first large scale concern as our newly elected president. Like most large scale government legislations, the economic stimulus bill has been revised so frequently that it’s been difficult for the average person to grasp, and to track what is currently part of the package. And if that isn’t enough, turn on any news channel and you will hear many well respected economists disagree about the plan, and provide excellent reasons why. Here’s where I’d like to try to make some sense of the muddle.
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Why Do We Receive Economic Stimulus Checks or Tax Cuts?
First, where did the Stimulus idea come from? This isn’t a new idea. You can find stimulus packages in nearly every company with large economies throughout modern history. Some experts speak of FDR’s New Deal as the most successful stimulus package in history. Others will tell you that there is very little stimulus in stimulus programs, and recovery would come naturally if government would stay out of the way. One thing is for sure though: such economic packages and those checks that come with them make the nation feel good. We get a stimulus check in the mail, we hear of jobs being created, and when people are scared, they feel better seeing the government doing something to help.
The 2009 Obama Stimulus Plan: Kill Two Birds With One Stone
Next, what are the important points? Think of the Obama stimulus plan as a “kill two birds with one stone” idea. We need roads and bridges. We need to create jobs. We need to have money circulating so that business can hire people to work on these projects.
For instance, we need to catch up to the rest of the world in science and mathematics but we’ll need money to educate people in these disciplines. America has a Wind Corridor in the heartland of the country but we lack the power lines and storage facilities to put wind power to work. The upgrades necessary to harness our Wind Corridor (which requires workers to upgrade the power grid) will also need funding. These are just a few examples of projects that could benefit from a stimulus plan.
Arguments Against The Economic Stimulus Plan
You’re probably thinking that killing two birds with one stone sounds like a fine idea. Are you surprised to hear that when the bill was voted on in The House of Representatives, not one republican voted yes? Let’s take a look at two of the most popular arguments against the stimulus plan.
First off, while putting people to work sounds like a great idea, new grass for the National Mall and birth control don’t sound like items that should be part of the stimulus package details. Republicans argue that democrats are using this as a means to get some of their pet projects under way. The republicans scored a partial win getting the birth control portion of the bill removed.
Secondly, job creation — while it’s a significant goal and a high priority — will take a while to happen. Large scale projects will take time to address and complete. For instance, when the government has electrical work done spanning thousands of miles, it will require bidding, permits, hiring of workers, manufacturing of materials and much more. This clearly won’t be happening overnight, and won’t be completed for a good long time (years!), for that matter. According to republicans, the recession will likely be over before these projects can benefit the economy. The democrats are calling their projects, “shovel ready” but many argue that that is not the case.
So what’s next? President Obama has stated that before the Senate vote, he is committed to making this more of a bipartisan effort and that he’s open to making more changes to the bill, if need be.
We don’t know everything about the Obama stimulus plan but we know the basics. Want to learn more? Find details of the 13 page congressional summary of the plan right here.
So will any second stimulus check, tax cut or other aspects of the plan help to save our economy? There will surely be some effect, but it remains to be seen how it will all shake out.
Contributing Writer: Tim Parker writes for Elementary Finance.