house stimulus plan, $819 billion stimulus, stimulus plan explained
Ron Edmonds/AP
White House Press Secretary Robert Gibbs speaks to reporters in the White House pressroom,
Thursday, Jan. 29, 2009, about the passing of President Barack
Obama's stimulus plan voted on
Wednesday on Capitol Hill.

What’s Really in the $819 Billion Stimulus Plan?

January 29, 2009 05:10 PM
by Anne Szustek
In an almost completely partisan vote, the House of Representatives voted to push through an $819 billion stimulus bill that now heads to the Senate. But what exactly is in it?

Tax Cuts and Education Spending Claim Biggest Pieces of Pie

The entire body of House Republicans and 11 House Democrats voted against the $819 billion stimulus package, also known as H.R. 1, which President Barack Obama is backing in a bid to rejuvenate the worst U.S. economy since the Great Depression.

The contents of the bill could shift slightly as it goes to the Senate for debate. But in its current form, the stimulus package includes large tranches for state aid; infrastructure and alternative energy; social spending such as education, health care, and food stamps; and room for tax cuts.

This new plan is separate from the $750 billion TARP bailout package approved in October, much of which has been given to several large banks to spur lending. The goal of Obama’s stimulus plan is similar: to breathe some life into the economy quickly and efficiently. But how exactly are the facets of the stimulus plan designed to achieve this?

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Background: The House stimulus plan: from soup to cuts

Like the TARP, the House stimulus package will be spent over a defined period of time, and will likely affect the economy in stages. Some of its programs are expected to boost the economy almost immediately, while the effects of others could take years to manifest.

The House stimulus package includes allocations for $20 million to be spent over five years on additional food stamp benefits, and $43 billion expended over two years to bolster unemployment benefits. Should the legislation be ratified by mid-February, the bulk of the additional food stamp aid should be rolled out in April. The unemployment aid would allow jobless Americans to collect unemployment benefits for up to 33 additional weeks.

The New York Times writes that these “automatic stabilizers” would help boost the economy due to their potential for immediate economic relief—they permit “money to flow quickly to people who need it and are likely to spend it.”

Education is poised to get a significant boost as well, with $140 billion in funding proposed under the House stimulus bill. That figure includes $13 billion per year over two years for schools falling under the Title I category, populated by underprivileged students, as well as $20 billion allocated to repair school buildings. The direct aid to Title I schools is expected to have more immediate effects on the economy than the educational infrastructure money will.

Green energy and health care spending under the stimulus plan may also have slower roll-out: the Times writes that “a large chunk of large health care spending would not start until 2012 or later, when, most experts think, the recession will be over.” One way in which health care spending under the House stimulus package is expected to have more immediate effects is by way of the $87 billion in federal Medicaid funding, meant to supplement states’ contributions.

According to a Congressional Budget Office breakdown, however, the most delayed effects on the economy will likely come from the infrastructure spending part of the package. The findings, cited by The New York Times, suggest that 64 percent of the $30 billion set aside for construction projects under the plan would be doled out over a 19-month period. Depending on how quickly the economy rebounds, federal funding for construction could be a boon or bane for the private sector.

Federal aid given directly to states is thought to be a facet of the stimulus plan that could have more immediate benefit, as it would help curb state job and budget cuts. Among the plans for stimulus aid directly to states is a $79 billion state fiscal stabilization fund, with half of the money to be distributed during the second half of 2009 and the remainder about a year later.

Tax cuts under the stimulus plans are expected to have what would be the swiftest effects on the economy. Accounting for roughly one-third of the total $819 billion package, or about $275 billion, the tax cuts entail credits of as much as $500 for individual filers and $1,000 for married couples.

This part of the plan has received both praise and criticism: it can be implemented quickly by way of changing tax withholdings, allowing just enough extra income to pop up on American workers’ paychecks to inspire workers to go out for an extra coffee or buy a more expensive lunch item. But at the same time, the benefits would be applied to families pulling in annual incomes of as much as $150,000, who are more likely to save the money than spend it.

Parts of the stimulus that have garnered particular criticism include funding for pursuits that are considered to fall more within the Democratic agenda, including $50 million for promotion of the arts and $335 million for education about sexually transmitted diseases.

Telling Reuters that he planned to vote against the bill when it comes to the Senate, Sen. Jeff Sessions, R-Ala., said: “I’m convinced that they [Democrats] are seizing this as an opportunity to fund programs to a degree that they could never have funded before simply by calling it a way to create jobs.”

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