Fresh off of a $787 billion stimulus package passed in February of 2009, congressional Democrats are now beginning to talk about passing a second, more modest stimulus package sometime within the next few months – aimed at easing the unemployment crisis. From Reuters:
Congressional Democrats’ push for another U.S. stimulus package got a boost on Tuesday from an analysis that found their earlier effort had blunted the impact of the worst economic downturn in 80 years.
As Democrats weighed measures to bring down the nation’s double-digit unemployment rate before the November 2010 congressional elections, they touted a nonpartisan report that showed the $787 billion stimulus package passed in February had kept between 600,000 and 1.6 million people off the unemployment rolls.
That effort, panned as a boondoggle by Republicans, also boosted the nation’s GDP between 1.2 percent and 3.2 percent, the Congressional Budget Office found.
Democrats hope to pass a more modest effort in the next two months, targeted at bringing down the unemployment rate.
That rate, currently at 10.2 percent, could have been above 11 percent had Congress not passed the first stimulus package, House Majority Leader Steny Hoyer said.
“Is it where we want to be? It is not, but it is certainly a very, very definite, positive impact on the economy,” Hoyer told reporters. “The actions we have taken have worked.”
Elements of the next package are still up in the air
There is still a lot of debate about whether the first stimulus did what it aimed to do, or whether it just added to our national debt. In any event, the Democrats are satisfied that it did what it set out to do, and they plan to pass another one to help ease the high national unemployment.
What Will Be Included In The Second Stimulus?
So what are some of the things that are going to be included in the new stimulus bill? No bill has been finalized yet, and the proposals seem to vary quite a bit, but here are a few of the provisions that have been proposed.
- New spending on highways, rail, water and sewer systems, and other infrastructure
- Increased lending for small business, using funds left over from the $700 billion Troubled Assets Relief Program
- Money to help struggling state governments avoid laying off police, schoolteachers and other public employees
- Money to local governments for job creation programs like park cleanups and refurbishing public buildings
- Further extending unemployment benefits and health-insurance subsidies for the jobless
- A tax credit for businesses that hire new employees
- Extending a package of soon-to-expire business tax breaks, such as a credit for research and development.
- Unspecified measures to help domestic manufacturing
- Upgrading buildings for greater energy efficiency
So it doesn’t look like there are a lot of stimulus measures being discussed that would give individual tax breaks, stimulus checks or other benefits for individual taxpayers. Most of the measures seem aimed at creating jobs, or saving existing jobs.
How Will They Pay For Another Stimulus?
One concern I have with any of these proposals for stimulus spending is – how are we going to pay for it? More taxes? Yes, probably.
The package could also include a tax on financial transactions to help cover the cost, but several Democratic senators said it would have to be written in a way to avoid driving financial activity offshore.
“I don’t want to impose a tax that clearly is going to make American companies less competitive, (but) it’s on the table,” said Democratic Senator Max Baucus, chairman of the tax-writing Senate Finance Committee.
Lawmakers are considering other ways to pay for the measure without threatening the shaky economic recovery. Highway construction, for example, could start quickly but be paid for through measures that would take effect in several years when the economy is healthier, said Democratic Rep. Betty Sutton, co-chair of a House task force set up to consider proposals.
Is it just me, or do they really not know how they’re going to pay for these measures – except through imposing a new tax on businesses – that will in the end cause more jobs to be lost? It really seems like their attempts to solve the problem are creating new problems in the process.
What do you think about these proposed stimulus measures? Do you think they should pass, or would you rather see them not taken up? Will they improve the unemployment situation or will they just add to the ballooning deficit? Let us know your thoughts in the comments!
I’ve always thought (from waaaay back when Bush was asking for stimulus packages) that stimulus should mostly focus on infrastructure spending. We badly need infrastructure upgrade in this country (it’s a disgrace that the wealthiest nation in the world can’t even maintain a modern infrastructure). However, some of the stuff that gets put into these bills — no matter what party is “in charge” — is just pure nonsense. Pure, expensive nonsense.
Miranda´s last post ..Learning from the Big Guys: Bank of America Ready to Repay TARP
Joe Plemon says
Peter: it is not just you.
More national debt with no plan to pay for it is indeed going to create more long term problems. If the short term goals (lower unemployment) seem to work, the politicians who came up with this genius plan will be patting themselves on the back. However, because government created jobs are artificial and temporary, we, the governed, will still be stuck with the debt. By the time the effects of this huge debt kick in, those politicians will either be gone or will blame the problems on the current administration.
Whether it is personal finance or national economics, more and more debt is not the best solution.
Thanks for a timely and thoughtful post.
Joe Plemon´s last post ..Do You Know How to Receive Gifts?
Surprised to hear this is even in talks, never thought there would be a second one.
I guess they have to get it in before they are all voted out of office at the mid term elections.
That is absolute insanity
David/Yourfinances101´s last post ..Gifts from the Heart, Not the Wallet
Our government is out of control. Ballooning our deficit will not solve our economic woes. Haven’t they learned from the 1st stimulus? While we are in tough times, spending the next generation’s future on the current problem is not the answer.
I wasn’t too happy about the size of the ‘current’ stimulus plan, and adding a sedond one a year later seems ludicrous. They are happy unemployment is ONLY 10%? Really? That’s a good thing? ‘Cause I have been watching movies from the early 80s and it sure seemed like everyone was out of work then and the unemployment rate was much lower than it is now. I expect this to pass because it feels so disappointing.
Rebecca´s last post ..
Sherry Browning says
I think social security people should receive a check since we don’t get tax breaks
Its interesting to see how far the stimulus package got us over this past year. Unemployment is up further than when we started and yet they stay its working? Not in my state its not.
Dan - BankVibe says
At least in the FED’s last meeting in Wyoming they didn’t signal towards more US-treasure bond buying…so hopefully the never ending string of stimulus packages are over.