February 14, 2009
A Smaller, Faster Stimulus Plan, but Still With a Lot of Money
By DAVID M. HERSZENHORN
On its way to becoming law, two crucial things happened to President Obama’s economic recovery plan: It got smaller and faster.
Smaller in that it was cut to $787 billion from more than $800 billion in early versions in the House and Senate. And faster in that the Congressional Budget Office now projects that 74 percent of the money will be spent by Sept. 30, 2010, compared with 64 percent in the original House bill.
Now the test is whether the mix of tax cuts and government spending, including public works projects, will create jobs and spur a recovery.
No one knows how it will turn out. Even Mr. Obama, who had predicted four million new or saved jobs, has pulled back to “more than 3.5 million.”
Short term, the plan is a big victory for Democratic priorities, like education, health care, energy and technology, which will get huge sums. It also offers new aid for the unemployed and tax breaks for the poor.
If nothing else, the plan is a striking return of big government. It also symbolizes continuing partisanship, despite Mr. Obama’s promise of new cooperation. No House Republican voted for the measure, and the three in the Senate who did are viewed as renegades by their party’s leadership.
Whatever the result, future generations will get the bill.
“This is so much money that if someone had begun spending $1 million a day — $1 million every day — when Christ was born,” said Senator David Vitter, Republican of Louisiana, “we would not yet be in 2009 to the full cost of this bill.”
Here is a look at how the $787 billion stacks up.
ENERGY AND ENVIRONMENT
The Bill Smiles on Power Programs
Programs to promote energy efficiency and renewable energy sources are big winners in the stimulus package, receiving more than $45 billion in new spending and tax breaks.
Included is more than $13 billion to make federal buildings and public housing more efficient and to weatherize as many as one million homes. The bill also provides more than $10 billion to modernize the electricity grid and install “smart” meters in homes and as much as $20 billion in tax incentives for wind, solar, hydro and other renewable power sources. Proponents say these provisions will create as many as 500,000 jobs.
The bill provides tax credits of up to $7,500 to buyers of new plug-in hybrid vehicles.
Also included is $18 billion for environmental projects, like clean water systems, flood control and pollution cleanup work. Congressional officials said these could create more than 375,000 jobs.
The bill provides about $2 billion to research a system to capture and store carbon dioxide emissions from coal-burning power plants, potentially reviving a demonstration program in Illinois that was killed by the Bush administration.
House-Senate conferees eliminated a provision, pushed by Senator Robert F. Bennett, Republican of Utah, to provide as much as $50 billion in loan guarantees to build new nuclear power plants. The Energy Department gets $6 billion to clean up sites where it develops nuclear weapons. JOHN M. BRODER
Research and Development Aid Restored
After being traumatized when Congress suddenly slashed research budgets for science agencies last year, scientists were pleasantly surprised to find that they did not lose out again in the last round of negotiations on the stimulus plan.
The plan largely restores research and development money for the basic sciences in the House version of the bill, while keeping $10 billion for the National Institutes of Health, championed by Senator Arlen Specter of Pennsylvania, a cancer survivor and one of three Republican votes for the plan.
The bill includes $3 billion for the National Science Foundation, $1 billion for the National Aeronautics and Space Administration and $1.6 billion for the Energy Department’s Office of Science.
The science foundation money includes $100 million for laboratory equipment at universities and $400 million for speeding construction of projects like a neutrino detector in Antarctica, a radio telescope in Chile and advanced gravity wave detectors in Louisiana and Washington State.
“The Senate backed down,” said Michael S. Lubell, director of public affairs for the American Physical Society, who had been dismayed at the extent of cuts proposed last week in the Senate. Even though the final Senate bill was less severe, Dr. Lubell was happy that the House’s science priorities prevailed.
“All the science accounts look wonderful,” he said. KENNETH CHANG
For the Needy, a Variety of Help
The safety-net provisions of the stimulus bill mingle two aims: to jump-start the economy and to protect the most vulnerable people as hardships intensify. Supporters say the missions coincide, since poor people are quick to spend. Opponents see a backdoor expansion of welfare.
The package provides an extra $20 billion for food stamps over several years. For the average family of three, that means a 19 percent increase this year, or an extra $63 a month.
The measure also adds $25 a week to every unemployment check, and continues extended benefits for the long-term unemployed through 2009, at a combined cost of $9 billion.
In addition, $14 billion will be spent on one-time payments of $250 each to recipients of Social Security, veterans’ benefits and Supplemental Security Income.
By quickly getting cash to people likely to spend it, all those moves meet classic definitions of stimulative spending.
Other efforts will move at a slower pace. Expansion of the earned-income and child tax credits will distribute an extra $20 billion to low-income workers, but not until next year.
The bill also provides up to $7 billion to encourage states to cover more workers with unemployment insurance, but that too will take time.
An additional $4 billion is set for job training programs, $2.1 billion to expand Head Start and $2 billion in child care subsidies. JASON DePARLE
Schools Get Large Infusion of Money
President Obama promised to increase education greatly, and the stimulus bill does that, providing about $100 billion in emergency money over two years for public schools, universities and child care centers.
More than half comes in a $54 billion fiscal stabilization fund for states, which are grappling with $132 billion in budget shortfalls. Governors are to channel most of that money to school districts and colleges, to avert teacher layoffs. They may also use some of it to modernize school buildings.
The repair money became contentious because it put Washington in the business of fixing schools, traditionally a state and local responsibility. Republicans insisted that the money for school buildings be included in the stabilization fund, and not as a separate line item, to underline that it was a one-time expenditure.
The bill includes $5 billion in “state incentive grants” that Education Secretary Arne Duncan is to use to leverage policy changes. To get the money, governors must provide “assurances” that their states are making progress toward school improvement goals like assigning experienced teachers fairly, so unqualified instructors are not disproportionately deployed to teach poor children. The bill increases the Pell Grant by $500, to a maximum of $5,350 for this fall, and offers a tuition tax credit of up to $2,500. The credit is refundable, so even people who pay no income tax can get 40 percent of the $2,500 in a Treasury check.
The bill also provides about $4 billion in new money for Head Start, Early Head Start and other pre-kindergarten programs. SAM DILLON
More Money for Medicaid and the Jobless
The final bill provides a huge infusion of federal money to the states for Medicaid, the health insurance program for low-income people. Without the money — $87 billion — states say they would probably cut the program, so that many people would lose coverage at a time when the need is growing.
President Obama won a partial victory in his effort to secure health insurance for workers who lose coverage when they lose their jobs.
The bill offers financial help to many of the unemployed.
Jobless workers can temporarily keep group health benefits under the 1986 Cobra law, but the cost is often prohibitive because they must pay the entire premium, including the employer’s share. Under the stimulus bill, the federal government would offer premium subsidies, paying 65 percent of the cost for up to nine months.
The aid would be available to workers who lose their jobs between Sept. 1, 2008, and Dec. 31, 2009. To qualify, workers must certify that their income will not exceed $125,000 for individuals and $250,000 for families.
Negotiators dropped a significant provision of the House bill that would have given states a new option to provide Medicaid for the unemployed, with the entire cost borne by the federal government.
The measure provides more than $19 billion to digitize medical records and link up doctors and hospitals with information technology. It includes new safeguards to protect the privacy of medical records, generally forbidding health care providers to sell individually identifiable health information without permission from the patient. ROBERT PEAR
Cuts for Individuals and Businesses
Roughly $282 billion of the stimulus package, or about 35 percent, is made up of tax cuts for individuals and businesses, including tax breaks for buyers of homes and cars.
The centerpiece is President Obama’s “Making Work Pay” income tax credit of up to $400 for individuals and $800 for couples in 2009 and 2010. The money will mostly be distributed through reduced paycheck tax withholdings, adding $8 or so a week that officials hope will be spent not saved. Individuals earning up to $75,000 and couples up to $150,000 will qualify for a full credit.
The bill also spares millions of middle-income Americans from the alternative minimum tax in 2009, raising the exemption to $46,700 for individuals and $70,950 for couples.
First-time homebuyers will be able to claim a tax credit of up to $8,000, for purchases made by Dec. 1, 2009.
Individuals earning up to $125,000 and couples up to $250,000 will be able to deduct the sales tax paid on a new car costing up to $49,500. And the bill creates a new $2,500 higher education tax credit, partly refundable for tax-filers who do not pay that much in taxes.
The stimulus package includes an array of business tax breaks, including accelerated depreciation, by 50 percent, of capital assets like new machinery placed in service in 2009.
But a provision that would have allowed businesses to claim tax credits by applying current-year losses to profits earned in the past five years was scaled back so that only businesses with $15 million or less in gross receipts are eligible for it. DAVID M. HERSZENHORN
A Victory, and a Setback, for Obama
By one measure, the public- works spending in the stimulus package exceeds the promises President Obama made as a candidate. But by another, it falls short.
The agreement calls for spending $120 billion on infrastructure, almost double the $60 billion Mr. Obama promised during the campaign. But it does not create the national infrastructure bank he had called for to set national priorities and get big projects done.
As a result, much of the money for roads will be distributed under existing formulas that give some to each state regardless of its needs or the merits of its projects.
While most spending was scaled back in the agreement, one area saw a huge increase: money for high-speed rail was quadrupled, to $8 billion. High-speed rail is popular with several moderate Republicans being courted to support the stimulus package.
The money would, however, be a only small down payment. California estimates it will cost $45 billion to build its high-speed line, and 10 other areas want to build one, too.
If transit advocates were excited by the rail money, they were disappointed that only $8.4 billion was included for mass transit, two-thirds of what the House had sought. Highways and bridges will get the biggest share, $29 billion, which officials estimate will create 835,000 jobs. At least half the money would have to be obligated by the states within 120 days.
The bill also contains $11 billion to modernize the electric grid, more than $6 billion for water projects, $6.5 billion to repair and build military housing and facilities, $4.5 billion to make federal buildings energy efficient, $4 billion to repair public housing and $7 billion to expand broadband access. MICHAEL COOPER