President-elect Barack Obama’s plan to fix America’s ailing economy has become a little clearer with the latest announcements. It appears that the biggest cog in the plan will be around $300 billion in tax cuts. Last year President Bush offered around $130 billion in tax rebates, which only briefly helped spark spending. Obama hopes that his measure has a bigger impact, and is electing to structure it in the form of a tax cut than a tax rebate. Along with the consumer tax cuts, Obama is also planning to cut taxes for businesses as well in an attempt to ward off the increasing level of layoffs and hopefully once again spur business investment. In addition to the tax cuts, Obama’s plan calls for around $200 billion to go to cash-strapped states, according to Daily News.
In total, this new economic stimulus plan could cost as much as $775 billion according to the Daily News. I’ll refrain this time from talking about the potential impact of this plan on the ballooning debt load we will likely leave for our children, but we should always remember that in the end someone has to pay for all these bailouts/stimulus packages. What I want to address is whether or not this program stands a chance. I would love to say that I believe that Obama’s plan is going to fix everything, but I’m just not feeling too confident. This plan is an improvement over Bush’s because it is meant to be lasting, not temporary. The rebates spurred spending for a few months, but the economy just continued to slide once the money was gone. Taxpayers were left with a huge bill and little to show for it other than a delayed recession. Obama’s plan could spread the goodwill out over a much larger period, but the question is whether it will be enough to really push us up and out of this economic rut.
About half of the total stimulus package funds are meant to spur job growth, with a goal of 3 million new jobs. In my mind 3 million seems a little high, and a tad unrealistic for us to obtain, but it sure sounds good. If we can get anywhere close to that number we will be doing extremely well. The plan calls for jobs to be created in infrastructure, energy, education and health care according to ABCNews.com. A major concern here should be how past government job creation movements have panned out: “’Time and again history has proven government-centered job creation doesn't work. Under [President] Carter in the late '70s people had all sorts of plans and ignored larger economic realities,’ former House Speaker Newt Gingrich told ABCNews.com.”
“‘In Japan they spent 13 years building an airport no one [once used]. Under the Socialists the French tried over and over again to create jobs and it didn't work. We know what creates jobs and it isn't putting the Treasury Department at the center of American capitalism. We need an investment strategy that supports the private sector and small entrepreneurial businesses,’ he said.”
Will the plan work or not? If past performance is any indicator it seems likely that this will just end up being another futile—and expensive—attempt to rescue the economy. No one wants to sit idly by and do nothing in the midst of this economic turmoil, but we shouldn’t blindly throwing away money at the problem either. This plan is definitely better than the last one put together by President Bush, but will it be enough? I have my fingers crossed, but if they had odds on this in Vegas I wouldn’t be betting for its success.