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Will the economic stimulus work?

Posted at 7:34 AM on January 29, 2009 by Bob Collins (3 Comments)
Filed under: Economy

President Obama's economic stimulus package has passed its initial test in the U.S. House of Representatives. So, prepare for stimulation!

The average worker will see an additional $12 to $13 a week, thanks to lower withholding, according to an analysis by the New York Times. The unemployed will see a continuation of unemployment benefits.

Republicans want more tax cuts, and they all voted against the package, a factoid that is being headlined this morning by a media that is infatuated with political good and bad guys rather than an analysis of what's in the bill.

The Tax Policy Center has issued a report card on all of this. It gave generally high grades to provisions that puts money in the hands of low-income people, because they're more likely to spend it. Obama's plan calls for a $500 tax credit for individuals and $1,000 for couples. A letter-writer in today's Star Tribune suggests that people who make more than $105,000 should be taxed higher in Minnesota, revealing a shortfall in the calculations of how effective the package is going to be: Of the money being sent our way, how much will be siphoned by increases state, county, or city taxes and fees?

Are you thinking about buying a home? There may be some incentive coming along, CNN reports.

The cost? About $6,000 per taxpayer or $2,800 for every person in America.

Will it work? At the heart of the stimulus philosophy: No matter how you benefit, you have to spend it. Will you?

Comments (3)

Putting a couple additional bucks into taxpayers' hands each week is not the kind of stimulus we need. The kind of stimulus we need is the kind that firstly puts more people to work. In an ideal scenario (which is quite unlikely to happen any time soon), demand for workers will eventually start to drive up wages & salaries. What the economy needs most is for people to have more discretionary dollars to spend - that weren't borrowed first.

It is unclear that the stimulus package can create enough demand for labor that an appreciable dent will be made in the unemployment rolls.

Posted by bsimon | January 29, 2009 10:47 AM

Nice article on Minnpost about the stimulus package.

Posted by Paul | January 29, 2009 8:25 PM

This little bit of money will mean almost nothing if I lose my job, which has seemed like a coin toss since about September. I'm guessing a lot of people feel that way and will stash the cash just in case. Just as the problem with the bank was that they were, and still are, afraid to lend, consumers have been, and still are, afraid they'll lose their jobs. A viscious circle, I know, but if people don't think they are going to remain employed, stimulus money to individuals will be meaningless. The money may have done some good before Christmas, but now that the employment numbers are in freefall, I doubt this parachute will open.

And if I save the stimulus money and don't get laid off, I can pass it on to my kids. They'll be the ones that will need to pay it all back anyway.

Posted by Al | January 29, 2009 10:00 PM

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