Political blurb: The stimulus plan

And this is why I am proud of who WE placed in office...This is the substance of a man thought to be image only...Well, wait a second, let me first explain the context of this post. Last week, I was pretty upset, stressed out, hurt, angry, emo etc...You get the point. So when the inaguration took place I had trouble getting into the moment, embracing the granduer of it all. I'd been somewhere else mentally, so this week is new, and things have been better, and all emotions aside, i've been wanting to research what's been on the agenda for the first 100 and the first issue that came to mind was the new stimulus package that our president has been trying to get passed (expediently). It brought tears to my eyes, as an employee with a retirement plan, and a student with loans who benefit from the Pell Grant, a future prospective federal government employee, county welfare civil servant, and just someone that's just trying to make it, this is important to me, this is the meat and bread of the political process, the things that are being pushed to help improve the quality of life and to decrease the effects of a deepening recession that affects us all. This is the biggest economic crisis since the second world war what happens in this first 100 days of a new administration are crucial. WE picked the right man for the job.
Obama's Stimulus Plan (via NY Times)

Obama's plan
aims to stimulate employment, certain critical economic sectors, and U.S. consumer spending. It specifies $550 billion in spending on new projects and $275 billion in tax cuts. The initial plan (PDF) includes investments for:

Energy, including $32 billion to transform the U.S. energy grid to make it more efficient; $16 billion to repair public housing and make it more energy efficient; and $6 billion to weatherize low-income homes;

Science and technology, including $10 billion for new scientific facilities and $6 billion to improve broadband Internet access in rural areas;

Infrastructure, including $30 billion for highways; $31 billion to modernize federal buildings and other public infrastructure; $19 billion for clean water, flood control, and other environmental investments; and $10 billion to improve public transit and rail infrastructure;

Education, including $41 billion for local school districts, $79 billion in outlays to states to prevent educational service cutbacks; $15.6 billion to broaden the federal Pell Grant program, which gives need-based grants to fund education; and $6 billion to modernize higher education programs;

Health care, including $87 billion for Medicaid; $20 billion to improve health information technology; and around $4 billion to improve preventative care.

The plan also includes $140 billion directed toward tax cuts of $500 per worker or $1,000 per family over two years; expanded tax credits for working poor with children; and a $2,500 college tuition credit. The House Ways and Means Committee approved the tax portion of the bill on January 22, though it has yet to pass the entire House of Representatives.

Some analysts say the Obama administration's spending on economic stimulus will be broader than what's included in the stimulus spending plan. "You've got to look at the whole picture," said Adam Posen of the Peterson Institute for International Economics in a January 2009 interview (PDF). Posen and several other analysts have noted that stimulus spending could come in many ways beyond what's in the plan, including:

The Treasury's $700 billion in TARP funds, initially aimed at stabilizing the financial sector, seems likely to be used to provide relief to other industries and "for things that look more like stimulus and less like asset purchases," according to Posen;

Automatic economic stabilizers like extensions of unemployment insurance;

Expansions of health insurance;

Some form of "mortgage relief" aimed at helping Americans facing default;

Federal Reserve purchases of mortgage-backed securities and perhaps other types of distressed securities in the future; and

An expanded GI bill for returning veterans
How Economic Stimulus Works

Economic or "fiscal" stimulus stands in contrast to monetary stimulus, a process through which the U.S. Federal Reserve Board adjusts interest rates to encourage or discourage lending. By 2009, the Fed had lowered rates to near zero. Because it can't lower rates below zero (which would amount to lenders paying people to take a loan), the Fed had few remaining policy options. Economic stimulus is another means by which a government can seek to boost its economy, either in the short term, by encouraging consumers or companies to consume goods, or in the longer term, by encouraging the growth of businesses and the creation of jobs through investments in infrastructure and research.

There are many different forms of potential economic stimulus and they work in different ways. Tax cuts for individuals generally encourage short-term spending. Tax cuts for companies encourage both spending and investment. Expenditures on public works create contracts for firms and provide short- to medium-term employment opportunities. Investments in research and development take a longer-term approach under the theory that businesses will thrive in the future (and thus provide jobs) if they have the money to make intelligent investments in their operations now.

Finally, some forms of economic stimulus seek to make investments that will pay off in the long run by making consumption cheaper for everybody. An example is investing in the U.S. energy grid. Theoretically, a one-time outlay could make energy costs for both individuals and businesses less expensive for decades to come. Similar arguments are made about health care spending. Critics say an outdated and illogical health care system presents significant costs for U.S. businesses that could be eased through front-end investments. Obama has called attention to both energy and health care as sectors in which infrastructure investments could help make U.S. firms more competitive internationally. Other countries, including China, have similarly focused stimulus spending on infrastructure development.