Agreement on the Stimulus

This happened a lot faster than I thought it would. Yesterday, the House and Senate had ironed out the differences between their two recovery packages to agree on a $789 billion bill. Senate Majority Leader Reid went out in front of the television cameras to boast:

“The middle ground we’ve reached creates more jobs than the original Senate bill and spends less than the original House bill.”

The Washington Post noted that, after all the negotiating and compromising, “the bill followed remarkably closely to the broad outline that Obama had painted more than a month ago,” with a roughly 60-40% split between spending and tax breaks. That is still a terrible split. At best it should have been a 70-30% or even better a 75-25%.

That said the compromise between the House and the Senate did make vital improvements to the Senate version, which would have created 9 to 12 percent fewer jobs than the version passed by the House while costing $17 billion more.

The new compromise cuts out big business giveaways, restores education funding, and raises funding for science research, among other improvements to the Senate bill:

– Eliminates big business tax giveaway. The compromise cut a provision from the
Senate bill that allowed companies of any size to claim an estimated $67.5 billion in tax refunds this year and next, by allowing companies to write off losses from 2008 against taxes paid over the last five years.
– Restores House funding of food stamps. The Senate had granted $16 billion in food stamp aid, but the new compromise expands that to the House’s full $20 billion funding.
– Removes nuclear loans. The $50 billion in loans for the nuclear industry, which were snuck into the Senate bill by “budget gimmickry” and which would not have created a single job for many years, were completely eliminated by the conference committee.
– Slashes tax cut for rich homeowners. The Senate bill granted a $15,000 tax cut to new home buyers, a provision Nobel Prize winner Paul Krugman called a “bonus to affluent people who flip their houses.” The new compromise “drastically reduced” the tax credit, cutting the overall cost from $35 billion to about $5 billion.

The compromise bill allocates $30 billion for smart grid technology and energy efficiency measures and nearly $46 billion to fund education and modernize schools, which is considerably higher than the Senate’s $39 billion total.

The Wall Street Journal also notes that the compromise significantly “expands federal aid to an array of programs aimed at the poor and jobless, with billions of dollars for health care, unemployment insurance, food stamps and other programs.”

Though the compromise bill is an improvement over the Senate version, it's too small and still includes non-stimulative tax breaks. The spending in the bill, the most stimulative component, fell from $604 billion as introduced in the House to $637 billion when later passed by the House, falling again to $545 billion in the Senate-passed version. The final compromise has only $513 billion in spending, with $276 billion in tax breaks.

One of the most egregious problems with the compromise is the tax breaks. Some of these tax breaks, such as the credit for new home buyers, are particularly non-stimulative, and the largest tax break is the $70 billion to spare millions of Americans from paying the alternative minimum tax. I am still not sure why the AMT is in there; the AMT has nothing to do with recovery. The AMT will offer no stimulus to the economy, and it would have been taken care of later in it's own bill, as has happened every year for over a decade. This was a wasted $70 billion. That $70 billion could have really helped the states, or gone into infrastructure investment.

Though President Obama admitted this week that “the plan is not perfect,” it’s clear the congressional compromise is a dramatic improvement over the Senate bill passed earlier this week. The final bill, after passing both houses of Congress, is expected to arrive on Obama’s desk no later than Monday.

Barack Obama's Economic Press Conference - 11/25/2008

President-elect Barack Obama gave another press conference today to discuss his plans for the economy and his idea's on government intervention. The President-elect stated quite clearly that some spending cuts will be needed. Mr. Obama used today's news conference to continue to define the two objectives that will guide his economic policy: properly invest the peoples money and not waste the Federal budget.

With the economy in crisis, Mr. Obama said, "Budget reform is not an option. It's a necessity."
Later he echoed Abraham Lincoln, "I will ask my economic team to think anew and act anew."

For some Obama's focus on careful federal spending is a contrast to yesterday's discussion about a stimulus package. I do not believe this is quite the contrast the talking heads will try to make it. Restoring the economy to health will be the priority over the budget deficit, but there is a lot of waste in our system. There is a lot of money that could be better targeted to help the economy.

John Boehner Is an Idiot

Congressional Republicans seem bound and determined to prove they have no idea what they're talking about when it comes to the economy.

Republicans quickly criticized the idea of such a vast [stimulus] initiative, saying Congress should instead cut taxes to spur economic growth.

"Democrats can't seem to stop trying to outbid each other -- with the taxpayers' money," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "We're in tough economic times. Folks are hurting. But the American people know that more Washington spending isn't the answer."

Actually the American people know that more Washington spending is exactly the answer the nation needs. You would think that Republicans would just shut up for a while, considering their policies drove this nation into a ditch.

Steve Benen of the Washington Monthly's Political Animal had some great advice for people during an economic crisis.

In a time of severe economic crisis, it's important that all of us -- voters, policy makers, investors -- remember to do two key things. First, keep a cool head and avoid panic. Second, pay absolutely no attention to congressional Republicans, who have no idea what they're talking about.

Luckily Barack Obama and Democrats in Congress seem to be taking this advice to heart and seem to better understand both the gravity of the circumstances this nation faces and the necessity for a remedy. While Barack Obama, during the presidential campaign, had talked about a $175 billion stimulus program, he now is looking at a stimulus package that may be four times larger.

Senator Chuck Schumer of New York told George Stephanopoulos yesterday that the stimulus should be between $500 billion and $700 billion. Schumer said:

"It's a little like having a new New Deal, but you have to do it before the Depression. Not after."

ABC News' Jake Tapper reports that Obama's transition team would like to see the stimulus package be passed by Congress and be in the Oval Office waiting for the new President literally the day of the inauguration. There are lingering concerns, though, that a Republican filibuster may scuttle the plan.

This is why we really need Al Franken to win in Minnesota, Martin to win in Georgia, and we need to pull in Collins and Snowe up in Maine to keep Republican's from interfereing. If Republicans want to offer constructive advice, or real suggestions, they should be at the table. If they are going to throw up road blocks for no other purpose than to scuttle the Democrats, then they need to be shut out of the room.

Obama-Biden Tax Calculator

Barack Obama and Joe Biden will cut taxes for 95% of working families, and provide at least three times as much tax relief for middle class families as John McCain and Sarah Palin. The Obama/Biden plan provides $1,000 of tax relief for workers and new tax benefits to help families pay for college, childcare and save for retirement.

Check out the Obama tax calculator site here and share it with your friends.



LibertyAir Blog

McCain Unveils New Economic Stimulus Proposal: Tax Cut For Millionaires

Today, John McCain finally revealed his new economic proposal. Remember on Saturday night, the McCain campaign told Politico.com that it was planning to unveil “new economic plans” that included temporary tax cuts on capital gains. Then on Sunday Morning Senator Graham said on the Sunday Morning news show that McCain would be coming out with a HUGE new plan. By Sunday night the McCain campaign was denying there was going to be a new plan, then there was some hint that there would be some announcement.

Monday came and John McCain didn’t announce anything, which caused some confusion, and then Barack Obama stepped up and announced “a new economic rescue plan geared toward middle-class voters.”

So of course John McCain decided he had to announce a plan. Of course since he and his campaign have no new ideas his new proposals was a lot like his old, with tax cuts for the rich. John McCain announced plans to “cut the capital gains tax on stock profits in half, from 15 percent now on stocks held a year or longer to 7.5 percent.

Think Progress has more here.

The Wonk Room’s James Kvaal noted the impact of cutting capital gains:

Households earning less than $50,000 a year collected a mere 2.5 percent of capital gains in 2005, according to the Tax Policy Center. Families earning more than $1 million a year collected 59 percent of capital gains. Moreover, most middle-class families with capital gains hold their investments in retirement accounts shielded against capital gains taxes.

Of course with the markets down 30%+ over the past year, the question is "What capital gains?"

Obama Add: John McCain voted to RAISE TAXES 477 Times

A great counter to the McCain campaign's tired accusation that Obama will raise your taxes.

The Truth About Obama & Taxes

There is a lie that continues to bounce around that Barak Obama is going to raise taxes on all Americans. The most egregious is that he is his going to raise the taxes on someone make $42,000 a year. This is a lie. A flat out lie.

It is true that the Obama's tax plan will increase income taxes on some Americans, while McCain will give a tax cut to all Americans, but considering the debt this nation is already burdened by, and the increasing deficits, McCain's plan is insane.

Look at the chart below to see where you are and whether you can expect a tax increase or a tax decrease.



Now personally I think even Barak Obama's plan is not the right one. I do think there will have to be some belt tightening by the entire country because of the hole the Bush administration has put us in. We are a nation with an economy that is teetering because of the excesses of the Republican party. However Obama's plan is head and shoulders above John McCain's. If your personal income taxes are important to you, you might want to consider voting for the candidate that gives you the greatest tax cut.