www.byzcath.org Forums General Discussions Town Hall Re: Stimulus/Recovery and Reinvestment Plan

In the last few weeks the Obama Administration has been pushing the Stimulus/Reinvestment Plan as absolutely necessary to pass quickly (correct me if I am wrong) or this country may further slide into economic disaster. I looked up the White House website and cut/paste the outline of the Recovery and Reinvestment Plan and post it here for this forum.

My question is why didn't the President divide the stimulus plan from the Reinvestment plan. I find nothing in the Reinvestment part of the Act that can't wait for proper debate. If you buy the idea that we NEED a stimulus plan to save our economy and that it is absolutely necessary then why not just propose a separate stimulus package first and then propose the Reinvestment Act at a later time for consideration!? The items in the Plan should be debated on in Congress just as you would any other major piece of legislation .Lets be honest, Obama Plan will spend up to $800 billion dollars of tax payers money! Is it possible that the Obama Administration is tying the stimulus idea and reinvestment idea together so they can get it passed without much debate? After all we absolutely need a new stimulus package because the other stimulus packages worked so well!(Please forgive my sarcasm)Below is main points of the Recovery and Reinvestment Act. What do you all think? Let's frame this discussion as a freindly but honest!

THE PRESIDENT'S AMERICAN RECOVERY AND REINVESTMENT PLAN
With each passing day, families across America are watching their bills pile up and their savings disappear.
President Obama believes that if we do not act quickly, this recession could linger for years – and America could lose the competitive edge that has served as the foundation for our strength and standing in the world.
That's why the President has put forth an American Recovery and Reinvestment Plan that will jumpstart job creation and long-term growth by:
• Doubling the production of alternative energy in the next three years.
• Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills.
• Making the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized.
• Equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries.
• Expanding broadband across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.
• Investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.
On January 8th, 2009 -- less than two weeks before taking office -- President Obama spoke on the need for urgent action on his American Recovery and Reinvestment Plan to save or create over 3 million jobs while investing in priorities like health care, energy, and education that will jump start economic growth. The plan represents not just a new policy, but a new approach to meeting our most urgent challenges.
The full text of the President's address is below.
Phil D.

Just a quick comment. If one reinforces irresponsibility, as this so called stimulus package does, it will only encourage irresponsibility. I predict that we have a long difficult road ahead of us as we head toward the black hole of Socialism.

Lord, have mercy.

CDL

Christ is in our midst!! He is and always will be!!

I admit upfront that I am not the sharpest tool in the shed.

Can anyone tell me how any of these proposals will immediately put anyone to work who has lost his job in the past year or will lose it in the coming year?

Investments are always long term and they take years to bear fruit.

Many of these proposals sound like the typical federal program to shift monies from one segment of the economy to another. Government has done this for years with little effect on the actual creation of jobs/careers/sustainable ways for a person to make a career and support himself and his family.

I notice that there is no mention of the Small Business Administration or expansion of its loan program that helps people establish businesses and hire other people to help them make a go of it.

Somehow I have the creepy feeling that we've been here before. Lyndon Johnson started the Great Society and pumped up the Vietnam War without a way to fund both together--via a tax increase. He printed money. So the ability of a head of household to earn enough with one income to sustain a family went out the door over the next two decades while inflation beat the American people into Third World citizens. I well remember double digit inflation in the 1970s and how it affected the ability to buy groceries week-to-week. Now it takes two incomes just to keep body and soul together. How will people do it when the ante is upped?

We're already borrowed to the hilt with IOUs to the Chinese, but we're going to spend so much money few can wrap their heads around what the amounts really mean.

Will someone be so kind as to explain this to me?

BOB

I agree with CDL on this issue... it's a spending and not a stimulus package

Yes it's shame President Obama has made such a shambles of the economy after George Bush left it in such great shape.

DAVIDinVA:

No one's saying that. In fact, the worst part of any political discussion concerning the economy is the custom of either blaming or congratulating the sitting president for either the failure or success.

Just as no politician can create a single job that lasts, no politician can do more than meddle in the economy, hoping to make it do what he wants it to do.

We can only hope that all this spending can do some good. But given the fact that the first 350 billion has had no effect and hasn't moved out into the economy yet I apprehensive about the effect if any. To blame the president isn't fair.

I do hope that some good comes out of this, but given past experience I'm not holding my breath.

BOB

As I'd be shocked if you did not know, stimulus plans do not work no matter who proposes them. It would not matter if George Washington were to come back to life and he were to support them. They do not work. It does not make any difference who proposes them they don't work. They are simply spending plans. They don't work. Mr. Nixon was wrong to say "We are all Keynesians now" and he was wrong for two reasons. We weren't then and we are now all Keynesians. He was wrong to suppose that that economic system actually worked. Jimmy Carter was wrong. Mr. Bush was wrong and Mr. Obama is doubly wrong because he's doubling the amount of funny money he's throwing down a rat hole.

Whether you understand the economic issue or not please don't side track it to an issue of party politics. Keynes was wrong because it leads to bridges going nowhere that produce no appreciable help for the economy.

There's not much we can do about it except to pray and to help pick up the pieces of broken lives while this disaster made by greed by everyone plays out.

CDL

Don't let Congress off the hook...they ain't innocent

Ain't it the truth?

Actually I think that people are on the right track. Did you see the stats on how much people are now saving? The way you build up the wealth lost is to spend less than you make. Liek my grandparents and great grandparents used to say--Live on half and save half. Now that might be very difficult in the current climate, but to say that you make due with a great deal less than you make is always a good rule. Then when things really get tight, you've already been living with a tight belt and have a little to fall back on.

When people save, our national wealth will grow and that which was lost in the crash will be replaced.

Again, as with so many other issues, what I do down here "where the rubber meets the road" to improve the lot of or maintain the lot of my own family is the key to the future. Presidents and politicians--God bless them--don't really have much impact unless they tax my thrift away.

BOB

The trend has been for many years, to put money into the financial sector, and let manufacturing perish. That seems backwards to me. Perhaps there are more vested interests in Congress with wealth dependent on the financial sector, who knows? However, if you really want to help the economy, send money to Charles. I promise I will spend it and put Americans to work. My first purchase will be a chocolate manufacturing facility.

Worth taking a look at!

February 3, 2009
An Earmark by Any Other Name Is Still an Earmark
by Karen Campbell, Ph.D.
WebMemo #2264

An analysis of H.R. 1, also known as "the American Recovery and Reinvestment Act of 2009," passed by the House of Representatives, shows that it fails to deliver on the economic promises of its authors, does not help the economy recover, and--worst of all--decreases investment rather than stimulating reinvestment.

Economists in the Center for Data Analysis at The Heritage Foundation used a widely respected model of the U.S. economy, the IHS Global Insight U.S. Macroeconomic Model, to estimate the economic effects of H.R. 1. Simulation results show:

* The 10 year average increase in GDP is only $72 billion;
* The 10-year average number of jobs created is 616,000; and
* Non-residential investment, which drives sustainable growth, actually decreases by an average $3.1 billion.

Debt should be used only to purchase assets that are income-producing--that is, assets that earn a return greater then the cost of borrowing. If the borrowed money cannot be paid back from the additional income produced by the investment, then the debt becomes a burden on the existing income steam. Many Americans have experienced this economic reality firsthand, and yet the nation's leadership is contemplating assuming this kind of debt--only on a much larger scale.

Borrowing close to $1 trillion to purchase a hodgepodge of appropriation earmarks not only does nothing to stimulate the economy, but it will actually further weaken the U.S. economy.

The Congressional Budget Office estimated the outlays over the next 10 years for each of the various spending and revenue categories. Using these estimates and outlay categories, analysts at The Heritage Foundation simulated the macroeconomic effects of H.R. 1. The simulation used a large structural econometric model of the U.S. economy.[1]

The results of H.R. 1 are compared to the tax simplification and reduction plan proposed by The Heritage Foundation in Table 1.[2] Both plans were simulated using the same model.

The maximum number of jobs created in any one year over the 10-year period from 2009 to 2018 by H.R. 1 is 1.6 million; this maximum does not occur until 2011. The largest increase in GDP comes in 2010 at $173 billion. Thereafter, GDP increases drop off considerably despite the government's continued borrowing and spending. The 10-year Treasury note--one measure of borrowing costs--is on average 0.5 percentage points higher throughout this time period. By 2012, the higher cost of borrowing starts diminishing investments, causing investments to be significantly less than the baseline.

Investments are a key driver of economic growth because they are made in anticipation of the investment improving productivity. The return on investment is the higher income created by the increase in the real quantity of output or the increase in the real quality of output. Higher income allows the investor to pay back the debt plus interest and still have additional income as a reward for taking the investment risk and growing the economy.

Since the government's revenue comes from taxes on the income produced in the private sector, government borrowing relies on the underlying productivity of the national economy in order to repay the principal plus interest on its debt. The lower level of new investments weakens the productivity of the economy making the H.R. 1 spending spree even more burdensome as interest and principal on this debt comes due.

A National Burden

H.R. 1 does not stimulate the economy. Indeed, by the CBO's estimates, most of the spending will occur well after the economy would have recovered on its own.

This government consumption spending creates a debt burden as lower investment spending diminishes the income streams available to pay the principle and interest on the debt. The debt will either have to be repaid with existing income streams or rolled over at higher interest rates. Consequently, investors will have to forego even more productivity-producing investments.

Rather than helping the economy recover, this bill further weakens the economy.

Appendix: Methodology

Analysts used the IHS/Global Insight model[3] of the U.S. economy and their October baseline[4] to simulate the effects of H.R. 1. The assumptions were based on the "Congressional Budget Office Cost Estimate: Bill HR-1: The American Recovery and Reinvestment Act" of January 30, 2009.

The spending categories[5] were placed into one of five aggregate variables used by the model: government non-defense consumption, government defense consumption, non-Medicare transfers to state and local government, Medicare transfers to state and local government, and cyclical federal transfers to individuals. These variables were increased by the amounts and years[6] specified by the CBO report.

The revenue effects were estimated by their effect on the average effective tax rate. This was calculated by reducing the "personal income tax receipts" variable in the model by the amount of the CBO-estimated revenue loss. The ratio of the effective tax rate to the previous tax receipts was used to estimate the H.R. 1 effective tax rate. The tax credits lowered the average effective tax rate by approximately 1–3 percent per quarter.

Lastly, the variable estimating the federal debt held by the public was increased by the amount of the deficit created in each year as estimated by the CBO report. The model was then run and the results obtained.[7]

Karen A. Campbell, Ph.D., is a Policy Analyst in Macroeconomics in the Center for Data Analysis at The Heritage Foundation.

[1]See the appendix for details.

[2]J. D. Foster and William W. Beach, "Economic Recovery: How Best to End the Recession," Heritage Foundation WebMemo No. 2191, January 26, 2009, at http://www.heritage.org/Research/Economy/wm2191.cfm.

[3]For information about the details and operation of the Global Insight U.S. Macroeconomic Model, see "Description of the Global Insight Short-Term U.S. Macroeconomic Model," at http://www.heritage.org/cda/upload/globalinsightmodel.pdf .

[4]The October baseline was chosen because baselines after this month began including stimulus spending by the federal government. Therefore, some effects would already be built into the baseline, which would have caused a type of double counting.

[5]The only "spending" that was not included in the model is the direct spending provision for health information technology. It was unclear how this provision would be implemented. The total amount of this appropriation is $20.2 billion. Its effect in the model would most likely be negligible.

[6]The CBO report estimated outlays in 2019. The baseline used for the simulation went to 2018 only. The additional spending in 2019 was $3.3 million. This would have an insignificant effect on the model results.

[7]Detailed results and assumption calculations are available upon request.


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Recent Heritage Studies

Sustainable Economic Stimulus: Repeal Capital Gains and Dividend Taxes by Karen Campbell, Ph.D. and Guinevere Nell
February 03, 2009

An Earmark by Any Other Name Is Still an Earmark by Karen Campbell, Ph.D.
February 03, 2009

Big Gains for the Automakers from Senator Jim DeMint's "American Option" by William W. Beach
February 02, 2009
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And you said you weren't very sharp.... Sounds like you are on top of it to me.

The "Stimulus" bill is mostly pork. Most of it is reward money for unions and other organizations that supported Democrats. Most of it designed to arrive just in time for the 2010 elections so that Democrats can get re-elected.

The only good thing is that they dropped Nancy Pilosi's $300 million to Planned Parenthood for "reproductive services" (contraception and abortion). She actually went on television and spoke about how "reproductive services" stimulate the economy by reducing the number of children! And she knows Catholic theology better then the pope!

Here's some of the pork. None of it really stimulates the economy. Any jobs created will need permanent government funding to last beyond the 4 years of this spending.

Growing government and spreading socialism never helps an economy recover from a recession.

The Wall Street Journal reported that only 5 cents of every dollar spent is for real stimulus.

VARIOUS LEFT-WINGERY:

1. $50 million for the National Endowment for the Arts

2. $380 million in the Senate bill for the Women, Infants and Children program

3. $300 million for grants to combat violence against women

4. $2 billion for federal child care block grants

5. $6 billion for university building projects

6. $15 billion for boosting Pell Grant college scholarships

7. $4 billion for job-training programs, including $1.2 billion to provide “youth” summer jobs for people up to the age of 24

8. $1 billion for community development block grants

9. $4.2 billion for “neighborhood stabilization activities”

10. $650 million for digital TV coupons, including $90 million to educate “vulnerable populations”

POORLY DESIGNED TAX RELIEF:

11. $15 billion for business-loss carry-backs

12. $145 billion for “Making Work Pay” tax credits

13. $83 billion for the earned income credit

STIMULUS FOR THE GOVERNMENT:

14. $150 million for the Smithsonian

15. $34 million to renovate the Department of Commerce headquarters

16. $500 million for improvement projects for National Institutes of Health facilities

17. $44 million for repairs to Department of Agriculture headquarters

18. $350 million for Agriculture Department computers

19. $88 million to help move the Public Health Service into a new building next year

20. $448 million for constructing a new Homeland Security Department headquarters

21. $600 million to convert federal auto fleet to hybrids

22. $450 million for National Aeronautics and Space Administration

23. $600 million for National Oceanic and Atmospheric Administration

24. $1 billion for the Census Bureau

INCOME TRANSFERS:

25. $89 billion for Medicaid

26. $30 billion for COBRA insurance extension

27. $36 billion for expanded unemployment benefits

28. $20 billion for food stamps

PURE PORK:

29. $4.5 billion for U.S. Army Corps of Engineers

30. $850 million for Amtrak

31. $87 million for a polar icebreaking ship

32. $1.7 billion for the National Park System

33. $55 million for Historic Preservation Fund

34. $7.6 billion for “rural community advancement programs”

35. $150 million for agricultural commodity purchases

36. $150 million for “producers of livestock, honeybees, and farm-raised fish”

RENEWABLE WASTE:

37. $2 billion for renewable energy research

38. $2 billion for a “clean-coal” power plant in Illinois

39. $6.2 billion shall be for the Weatherization Assistance Program

40. $3.5 billion shall be for energy efficiency and conservation block grants

41. $3.4 billion shall be for the State Energy Program

42. $200 million shall be for state and local electric-transport projects

43. $300 million shall be for energy-efficient appliance rebate programs

44. $400 million for hybrid cars for state and local governments

45. $1 billion for the manufacturing of advanced batteries

46. $1.5 billion for green technology loan guarantees

47. $8 billion for innovative technology loan guarantee program

48. $2.4 billion for carbon-capture demonstration projects

49. $4.5 billion for electricity grid

REWARDING STATE IRRESPONSIBILITY:

50. $79 billion for State Fiscal Stabilization Fund

Responsibility for the economic recession can be shared. And the Democrats are mostly responsible. The biggest cause of the recession is the mortgage crisis. And it was caused by Congress and mostly by Democrats. Barny Frank and Chris Dodd were the leaders of the "Community Reinvestment Act" that forced Fannie Mae and Freddie Mac to make sub-prime loans to people who could not afford them. When the interest rates went up these people could no longer pay their mortgages and walked away. So the rest of us have to pay for them. Barney Frank said openly that he thinks that everyone has a right to own a home and what they did was morally right. He ought to be removed from Congress and thrown in jail.

To his credit President Bush asked Congress several times in the past 8 years to fix the problems. And Senator McCain actually twice proposed legislation to return to the 20% down rule and having to prove you can actually pay back the mortgage. The Dems in Congress did not listen.