Can more federal “Stimulus” spending turn around the sputtering economy?
The Obama administration has the difficult task of trying to convince Congress and an even more skeptical American public that additional federal spending can turn the tide on a dormant U.S. economy. After more than $1.1 trillion in earlier stimulus spending, the unemployment rate remains at a stagnant 9.6 percent, home foreclosures are up 25 percent, poverty rates are at a 50-year high and the national debt is an ever increasing $13 trillion. Polling shows that the public is unconvinced that more spending can solve our current economic problems.
President Obama is asking Congress to approve at least $50 billion in long-term spending in the nation’s roads, railways and runways in a pre-election effort to again attempt to stimulate the sputtering economy. However, likely aware of the public’s negative assessment of the effectiveness of the first stimulus plan, the administration appears to not want to call this next phase of federal spending a “stimulus package.” In fact, when CBS’s Chip Reid asked whether the White House’s latest economic policy proposals were “a second stimulus,” Obama dodged the “stimulus” labeled bullet by spinningly responding that this new $50 billion in proposals were, instead, meant to simply “stimulate growth and jobs.” The infrastructure spending is part of a package of targeted proposals the White House announced on Labor Day in Wisconsin at a gathering of union members and officials.
The goals of the administration’s infrastructure plan include: rebuilding 150,000 miles of roads, constructing and maintaining 4,000 miles of railways and other shorter, high speed rail projects, rehabilitating or reconstructing 150 miles of airport runways, and installing a next generation air navigation system designed to reduce travel times and delays.
The administration is uncertain of the final cost of the infrastructure projects, but did indicate that the $50 billion represents a significant percentage of the eventual total cost. Officials said the White House would consider closing a number of special tax breaks for oil and gas companies to pay for the proposal.
Congressional approval of the proposal is highly uncertain with many legislators and voters worried about adding to federal deficits that are already at record levels. With Republicans saying spending is out of control, even many Democratic lawmakers are reluctant to approve new spending so close to Election Day.
In addition to the Labor Day announcement in Milwaukee, President Obama announced an additional proposal (that is not being called “stimulus”) for $100 billion to increase and make permanent research and development tax credits for businesses. There is some agreement in Washington that by helping small businesses it will help to create jobs. While the idea is popular in Congress, coming up with offsetting tax increases or spending cuts has been a stumbling block.
Obama is also continuing to prod the Senate to pass the small business bill that calls for about $12 billion in tax breaks and a $30 billion fund to help unfreeze lending at smaller community banks. Republicans have criticized the bill as a smaller version of the unpopular bailout of the financial industry.
Last but not least, the President wants to make permanent the portion of George W. Bush’s tax cuts affecting the middle class. Republicans are insisting that tax cuts be extended for higher-income wage earners too. Taxes for everyone will rise next year unless Congress acts.
Question Of The Week
Whether you agree to call President Obama’s proposed additional billions another “stimulus” or “bailout,” should the federal government continue to add another nearly $200 billion to the federal deficit in order to help jump start the economy?