$787 billion stimulus becomes law

“An economic crisis (exists) unlike any we have seen in our lifetime,” said President Barack Obama in a speech commemorating the 200th anniversary of the birth of Abraham Lincoln on Feb. 12. The American Recovery and Reinvestment (ARR) Act, passed Feb. 13 and signed into law Feb. 17, addresses the crisis Obama described. The act itself is nearly unprecedented in size and scope, totaling more than $787 billion in spending and tax cuts.

“It’s very different from the Bush administration’s fiscal stimulus plan in 2001 and 2003,” said Robert Williams, Voehringer professor of economics. “The Bush administration pushed through massive tax cuts, which primarily went to the highest-income groups. There’s a huge difference with the Obama stimulus package: it has some tax cuts in it, but they primarily go to middle class and lower-income people. It’s not just welfare for the wealthy.”

The plan allocates $102 billion in funding for unemployment benefits, food stamps, short-term Medicaid for people unable to afford health insurance, and other welfare programs for the struggling.

These may be able to help those whose jobs disappeared in the first wave of the recession, or those, like many college graduates, who cannot find employment after finishing school.

According to The New York Times, over $16 billion was cut from the plan in the interest of curtailing spending. Some feel that $16 billion in concessions isn’t enough.

“This is so much money that if someone had begun spending $1 million a day . when Christ was born, we would not yet be in 2009 to the full cost of this bill,” David Vitter, a Republican senator from Louisiana, said to The New York Times.

Health care alone represents $112 billion of the bill, with the majority directed to the previously stated Medicaid assistance and the rest going to improving hospital technology, weeding out ineffective prescription drugs, and providing preemptive care, according to the U.S. Preventative Plan.

Obama’s education plan focuses largely on block grants to public school institutions, while also funding Special Education programs and the overall application of the 2001 No Child Left Behind Act, using $141.6 billion of the plan’s grant money.

Colleges get a percentage, too: The Pell Grant, a need-based tuition grant, received $14 billion in order to raise its maximum grant to $5,350, and the college tuition tax credit was expanded by $2,500.

Energy improvement includes a marked increase in funding for renewable energy programs and preventative measures, which include weatherproofing the houses of lower-income families, advancing alternative fuel research, and cleaning nuclear waste sites.

The most costly section of the ARR Act is its tax reforms. Totaling $282 billion, the package lives up to Obama’s early campaign promises of “Making Work Pay.”

Individuals receive $400 in income tax credit and couples $800. The money will be distributed slowly in the form of paycheck-by-paycheck tax kickbacks, adding about $8 a week to the average worker’s salary, according to the Washington Post.

Individuals and couples buying cars and houses for the first time will be able to deduct the sales tax from their purchases, so long as they do not make above $125,000 and $250,000, respectively.

The tax cuts, which were pushed for by a largely Republican faction in the House and the Senate, were the subject of such controversy that the bill stalled for weeks. During this time, $35 billion was slashed from a fiscal stabilization fund and much of the proposed support for school construction was cut. Even so, all but three Senate Republicans voted against the bill.

Controversy continues even after the fact.

“I’m scared,” said Robert Duncan, assistant professor of political science. “If this kind of political gridlock and finger pointing and lack of bipartisanship continues along party lines and nothing gets done, the Great Depression is going to look like a picnic.”

“What’s going to happen this May when (college graduates) leave school and look for employment?,” Duncan continued. “There are no jobs. That will build unrest, unhappiness, a politically explosive situation.”

A recent report from the Congressional Budget Office added to the disquiet, saying that the stimulus package would increase employment in the short run, but that the national GDP would decrease by .01 to .03 percent in the long term.

The Obama administration remains optimistic. Their stance seems to be that inaction would be the most destructive way to approach the current crisis.

“I do not want it said,” President Obama affirmed during his Feb. 12 speech, “that we saw an economic crisis, but did not stem it. That we saw our schools decline and our bridges crumble, but did not rebuild them. That the world changed in the 21st century, but America did not lead it. Instead, let them say that this generation – our generation – of Americans rose to the moment.