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Obama, Dems tout stimulus for ailing economy

January 28, 2009
The top item on President Barack Obama's agenda as the newly-elected commander-in-chief is rekindling a sluggish economy. His solution is an $825 billion stimulus package backed by Congressional Democrats known as the American Recovery and Reinvestment Plan.

The plan has been altered a bit since its original inception and may be altered still this week as the House debates it, but the proposal as it is now consists of an amalgamation of capital infusions into education and state governments, tax credits and tax breaks. Obama said it is a "plan that will save or create three to four million jobs over the next few years."

There are mixed emotions regarding the proposed stimulus package locally.

"I'm no economist, so I don't know the particulars, but something has to be done to keep people from losing their jobs and their homes," Steve Webster of Paoli said. "I think we should give Obama a shot and see if this (stimulus) works."

A Crawford County resident who wished to remain anonymous said the stimulus is "a waste of taxpayers' money."

Myrtle Yohn of Georgetown still had questions about how the stimulus is to be funded.

"I think the money for the schools and for Medicaid is good, but I'm not sure about all the tax breaks they're talking about." she said. "How are they supposed to fund this thing if people are paying less taxes?"

The massive stimulus has created division and some confusion on Capitol Hill, as well. Republicans oppose the stimulus because they think it needs more tax breaks. The current version consists of $275 billion worth of tax cuts. They also cite an analysis conducted by the bipartisan Congressional Budget Office that said less than half of the highway construction funds, totaling $30 billion, would be released into the economy during the next four years.

Some economists have predicted the recession will end in late 2009. If that happens, it means a majority of the funds for infrastructure would be coming after the recession. Republicans argue the package is not a short-term stimulus but a long-term government spending plan. Obama addressed the complaints by releasing a letter saying he wanted at least 75 percent of the $825 billion spent by Sept. 30, 2010.

While there are some portions of the plan that are slow to come to fruition, monies like the $275 billion in tax cuts and the $87 billion in aid to state Medicaid programs will be distributed rather quickly since there is a structure already in place to move these funds. Medicare currently provides health care for 59 million needy and disabled Americans, but many expect that number to grow with the increasing number of layoffs.

In addition, the proposed tax credits of $500 for individuals earning up to $75,000 and $1,000 for families earning up to $150,000 would also be distributed by the end of the year. This range includes 95 percent of income tax filers. There will also be a $2,500 American Opportunity Tax Credit that will be available to nearly four million students. One-fifth of high school seniors who receive no tax credit under the other system will receive a cut to make college affordable.

But Republicans aren't too keen on the tax credits either. They favor tax cuts to the two lowest income brackets, from 15 percent to 10 percent and from 10 percent to 5 percent, as well as a small business tax deduction equal to 20 percent of the owner's income. They say this will give families an average of $1,700 in savings.

Another part of the debate involves the "Buy American" provision that will require that construction materials for schools and roads and information technology for the new computerized health care system be purchased from U.S. manufacturers. Democrats favor the provision, saying it will stimulate the domestic economy. Business lobbies, including the U.S. Chamber of Commerce, oppose the provision, saying it could "undermine the U.S. commitment to open commerce and create tensions with trading partners."

Among other parts of the plan, there is a commitment to make 75 percent of federal buildings energy efficient, saving a projected $2 billion a year in taxpayer money, and a Clean Energy Financing Initiative that provides incentives for companies in the private sector to go green.

Education is one of the major beneficiaries of this stimulus package. Schools are expected to receive nearly $142 billion over the next two years; $26 billion will be spent to finance No Child Left Behind and provide funding for the Individuals with Disabilities Education Act, while another $15 billion is also provided as a bonus to encourage reforms in teacher pay and student testing.

The House will vote today (Wednesday) on whether or not to approve the proposal as is. With a comfortable Democrat majority, it is expected to pass easily. The Senate, however, could prove a more difficult road for Democrats since the Republicans still have the power of the filibuster to delay the vote.

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Barbara Shaw
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