Democrats unveil stimulus plan, but warn it won't do job

[Mrs. Sharon B. Hodge]

Democrats unveil stimulus plan, but warn it won't do job
By Kevin G. Hall and David Lightman


WASHINGTON — Democrats in the House of Representatives unveiled their economic stimulus plan on Thursday, proposing $275 billion in tax cuts and credits to jump-start the economy and $550 billion in spending for clean energy, road construction, social welfare programs and emergency assistance to states.

Thursday's rollout was the first step in what's sure to be a lively debate in the weeks ahead over the proposed $825 billion American Recovery and Reinvestment Bill of 2009, the largest stimulus measure ever.

In a related move on Thursday, the Senate voted to make the remaining $350 billion in Wall Street bailout money available when the Obama administration takes office next week. President-elect Barack Obama's chief economic adviser, Lawrence Summers, sent a letter to Congress on Thursday promising to use up to $100 billion of that to address the national mortgage foreclosure crisis, something the Bush administration had ruled out for the bailout funds.

The stimulus plan was crafted with input from Obama, who was scheduled to appear at a factory in Ohio on Friday to talk it up.

"This plan is a significant down payment on our most urgent challenges, and it will contain the kind of strict, independent oversight that will allow the American people to hold Washington accountable for how and where their tax dollars are spent," Obama said in a statement.

House Speaker Nancy Pelosi, D-Calif., said the stimulus package aims at "immediate job creation and continuing job creation," but the House Republican leader, John Boehner of Ohio, took one look and vowed to fight the plan.

"Oh my God," he said slowly as he described his immediate reaction. "I just can't tell you how shocked I am at what we're seeing . . . . Everything all these agencies want to do is in here. I don't know how this is going to stimulate the economy."

Pelosi said that Congress hopes to send the measure to Obama by mid-February.

Many mainstream economists favor a large and immediate spending plan, particularly on public works projects that create jobs. They think that government must create demand in an economy suffering from business and consumer retrenchment.

"The stimulus plan as laid out will provide a vital boost to the flagging economy. Without it, the jobless rate is headed well into the double digits — a depression in my nomenclature," said Mark Zandi, chief economist with forecaster Moody's Economy.com. "Stimulus is more than dollars and cents, however. It has to be passed quickly and sold well to shore up crumbling confidence."

As promised, the legislation appears free of earmarks, the pet projects of individual lawmakers. Republicans, however, insisted that it was laden with pork since many of the spending provisions amount to a longstanding Democratic wish list that goes far beyond short-term stimulus.

The measure would provide $79 billion to state and local governments to prevent cutbacks in vital services, including $39 billion to local school districts and public colleges. It would provide $30 billion for highway construction and $19 billion for clean water, flood control and environmental restoration efforts. Another $84 billion is set aside for renewable energy production and enhancing energy efficiency.

Many of the provisions are designed to spark quick job creation in areas such as road building and health-care. They also are intended to promote a shift toward "green jobs," where construction workers retrofit and modify federal buildings, public housing and even "modest-income homes" to enhance their energy efficiency.

"They hit it over the fence," said Phil Angelides, chairman of the Apollo Alliance, a coalition of business, environment, and labor groups pushing for federal support of clean energy technology.

In a summary of the legislation provided by House Appropriations Committee Chairman David Obey, D-Wis., however, Democrats warned that the bill won't be a cure-all.

"The economy is in such trouble that, even with passage of this package, unemployment rates are expected to rise to between 8 and 9 percent this year. Without this package, we are warned that unemployment could explode to near 12 percent," the summary said.

The Labor Department reported on Thursday that 524,000 people filed jobless claims during the week ending Jan. 10. That underscores that the economy continues to deteriorate rapidly. More than 1 million Americans lost jobs in the final two months of 2008.

The stimulus plan proposes $43 billion for increased unemployment benefits and job training.

It also includes another $39 billion to subsidize and extend the period of government-mandated health-care coverage — called Cobra — for laid-off workers. The measure would extend the 18-month limit of Cobra coverage for laid-off workers who are 55 or older. Workers who've been employed 10 years or longer by one company would be able to retain Cobra coverage until they find a new job or become eligible for Medicare.

Rep. Charles Rangel, D-N.Y., the chairman of the tax-writing House Ways and Means Committee, rolled out the tax provisions of the stimulus plan separately. There was plenty in his bill designed to win over Republicans and business interests, including a proposal to let business deduct losses retroactively over five years. This allows companies large and small to use the tax code to bolster their balance sheets.

The tax measures also would allow businesses to more quickly write off expenses and equipment. A number of provisions would spark purchases of state and local bonds and extend tax credits for renewable energy production.

House Democrats would fulfill Obama's promise of a tax credit for most Americans. Single filers with adjusted gross income below $75,000 would receive a $500 tax credit, while joint filers with adjusted gross below $150,000 would get back $1,000.

For employed Americans, this credit would come quickly in the form of less money deducted from their withholding taxes. Because it's refundable, Americans without income could apply for it. The measure also proposes expanding the earned income tax credit for poorer workers and increasing the child tax credit.

Much in the package appears unrelated to short-term stimulus or long-term competitiveness. For example, it would give $1 billion to aid states in the collection of child support, another $1 billion toward preparations for the 2010 census, $4 billion to support local law enforcement and $800 million to clean up hazardous and toxic waste sites.

However meritorious such items may be, Republicans argue, they don't stimulate the economy or significantly create jobs. Boehner singled out education funding, especially help for college students.

"Why should taxpayers have to put this money out (for people to) go to universities that have billions of dollars in (private) endowments?" he asked.

Obey, the chairman of the House committee that controls spending, said the package isn't a spending plan in disguise, as Republicans charge.

"This is not a grand new spending program," he said, noting that education funding directly helps cash-strapped states. "States have seen the bottom drop out of revenue projections around the country."

Other features of the package would:

_ Provide $20 billion to increase by more than 13 percent the food-stamp benefit.

_ Give $87 billion to state governments for a temporary increase in the matching rate that the federal government pays to support their Medicaid programs for the poor and disabled.

_ Designate $32 billion to "transform the nation's energy transmission, distribution and production systems" to build a "smarter" energy grid that can use more inputs from renewable sources, such as solar, wind and alternative fuels.

_ Set aside $16 billion to repair public housing and install energy efficient windows, heating and cooling units and other such improvements.

(Renee Schoof contributed to this article.)

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PUBLIC OPINION :

P.S. Public spending projects are just a method to keep hundreds of thousands and more Americans from starving to death until the greedy among the rich either die, get old enough to think better of just sitting on their billions and trillions and start spending some of it, or begin to understand that you stop making money once nobody but the rich have any money.

Think of public spending as trucking in water: You do it until it rains again.

"FDR's public works projects did NOT end the Great Depression. Unemployment was just as high after 9 years of government's misguided spending as at the beginning."
Sigh...you guys never have anything to offer except biased hypotheticals.

Do you know what you are really saying when you use that line? You are saying that once the American people are foolish enough to once again fall for "trickle down" economics, it takes decades to recover from the damage that the Republicans cause in satiating their greed.

If it won't do the job, then why are we mortgaging our children's future?

The only thing that's going to put this economy back on track is if we return to the Constitution and stop stripping the population's wealth through taxation and special interest regulations.

http://ewebsmith.com/Finance/hiddendemon.html

We need to concentrate on a few basic facts:
FDR's public works projects did NOT end the Great Depression. Unemployment was just as high after 9 years of government's misguided spending as at the beginning.

FDR's public workds projects and government interference in, excuse me, "helping" the economy turned the Hoover 1-year recession into a 9-year depression.

World War II ended the Great Depression. Perhaps we should call World War II the "mother of all public works projects."

This is not a very promising outlook for our peaceful future...

I don't care if Boner is a republican,democrate or a wing nut he's dead on when he says it will do nothing for the economy.Jobs they cry reminds me of Clintons cry of "I Feel Your Pain' than wacked us we another hugh tax increase,now I know its easy to sit back and say create good paying jobs but the fact is it takes years to do it,what field are you going to create them in the public sector field's so we can screw the next generation as we have done to this one on the Social Security program,talk about a ponzi scheme.The best thing that could be done is to let the system flush itself out for in this case the mis-guided cure is going to kill the patient.Or maybe the next generation can just sell themselves as slaves like the did in the wanning days of Old Rome to get away from the hugh burdens placed on them by the state,for this is what we are doing.!!!

My plan? Take this money divide it by the population and mail everyone a check.

Is not better to buy billion of dollars worth in Food Stamps and handle those food stamps to the people in need, and people should be able to rent a home with a food stamp or pay the electric bill with a food stamp?

Boner said, "I don't know how this is going to stimulate the economy." Well, it's simple, it's called jobs. Jobs to the middle class who will spend the money right here in America instead of putting it in off-shore investments. IT'S JOBS, STUPID!! Something that you Republicans forgot about and the main reason you are now out of power.

I have just one question for Boner, "Where was all your concern when Bush was pushing his off-the-books borrowing to finance his adventure in Iraq? You didn't worry then but rather lined up behind Bush just like a bunch of lemmings. The Iraq money may not be budgeted but it has to be paid for out of the pockets of the American Taxpayers.

Tel: [phone] JOHN MARDEN Fax: [phone] LOWELL ROAD
e-mail:[e-mail] CONCORD, MA 01742 January 15, 2009
PAPER ESTATE STIMULUS versus REAL ESTATE STIMULUS

What I propose is attacked by orthodox economists as being absurdly oversized and out of scale. Are they not mistaken? It may seem enormous on paper, but the procedure would likely balance out at little public cost; whereas the loss from exclusively helping the investment/banking forum, already approaching a trillion dollars of aid, plus unimaginably greater losses from the failed economy and its consequential destruction of America’s middle class, will be beyond compare.

Back in 1956 I asked my elderly brother-in-law, the late Fred Lund of Boston to define the difference between what were then called the real estate and the paper estate arenas of business. “That is very easy for a lawyer who practiced throughout the Great Depression;” he said, “One is a place where you can grow potatoes; the other will light you a short lived fire.”

Mr. Lund’s observation offers both warning and advice to the new Administration, to Congress and to their advisors as they search the auguries for stimuli needed to revive the world’s economy. In addition to the near trillion dollars of support already designated for the paper estate’s banking/investment forum, they now propose new costly programs to improve our infrastructure and find employment for more than three million people. They presume to funnel feed these programs through another part of the paper estate, themselves and their State and local government brethren. It may be fun, but the result will be overwhelmingly insufficient in practicality and at best likely to build bridges to nowhere.

Their effort neither plants potatoes nor addresses the self-perpetuating collapse of the housing market, already involving more than two million foreclosures. The current loss of home equity value approaches three trillion dollars and is rising. Not long ago this pool of equity comprised the largest middle class investment and savings account in the world. Its loss makes the Madoff paper estate scam look tiny; yet orthodox 20th century trained economists ignore it as they await their classical laissez-faire market-place correction to take hold. That remedy will take a long time to filter throughout the world; and while the world waits, many people will starve.

The revival of the housing industry requires directly structured attention to all the banking/investment forum’s real estate mortgage portfolios. Recent news suggests that many commercial mortgages are about to fail. Foreclosures must stop. Yet, the banks need to regain enormous amounts of money in order to settle their mortgaged backed security obligations and, once settled, finance the economic expansion we seek. If the money cannot come from the foreclosures, whence can it come?

To reverse, revive and revise the housing industry calls for bold action. A new government authority should be established under the control of the Federal Reserve Bank (the FED) from a revision of its current role in regard to the housing industry and the roles of Fannie May, Freddie Mac and AIG. The new authority should affirm two basic tenets; namely, that housing itself comprises the center-fold position within the infrastructure; and that its industry’s call for improvements combined with the authority’s support and oversight is likely to produce more pertinent results than anything politicians may select, especially now while allowing the industry to collapse around them. Furthermore, solving this real estate crisis will also revive the paper estate’s banking/investment forum; whereas working alone within the paper estate’s forum will fail both arenas.

To bring solution to our current economic crisis requires a scope of government intervention sufficient (1) to stop the foreclosures and thereby reverse the self-propagating decline of real estate values (the home equity value) that is currently happening; and (2) to simultaneously provide the banks with an enormous supply of new cash in order to settle their inter-bank mortgage security liabilities and provide the global economy with liquidity for expansion.

This can happen at little cost to the taxpayer. The procedure would require the FED to discount, but not to purchase, at least all owner occupied housing mortgages (perhaps all mortgages) at or near the lending institutions’ full investment cost after the institutions reduce their interest charges to a maximum rate close to the T-bill rate, but otherwise a variable rate to be set by the FED, which I suggest should initially be 0% for three months as the FED watches for results. The banks would also have to guarantee the mortgages at their reduced rate of interest and continue to service them.

In this manner the FED’s credit will protect the mortgagors of Main Street from foreclosure and begin to revive their home owners’ equity account, but that credit will flow to the banking/investment forum’s (Wall Street’s) rescue, reversing the trickle down to a trickle-up analogy. Delivery, however, would be more like flow from a fire hose than a trickle. Such delivery, and not less, is now needed by the banks to help them partake in reversing the current deflationary collapse, in restoring confidence and providing success to the new global market place. Its charm is that it will cost nothing but the use of the FED’s credit, which credit will be fully collateralized by the value of all the assigned mortgaged properties, indeed, much of America. The lenders will need to regenerate their income. However, they will have an enormous flow of new cash with which to do it. The FED together with foreign central banks can once again concentrate upon controlling the inflationary tendencies that hopefully will soon reappear.

Of course, there are important ramifications to consider. In A Shot out of Concord and some mailings I suggest that some 20th century economic perspectives have been superseded by the advent of the new global economy. It is a revision that orthodox economists find difficult to accept. I may not express these thoughts well; but I am happy to share them for development by better minds than mine. I will e-mail them upon request sent to . Yours truly,
John Marden

Looks like we need yet another war.