Economic Stimulus 2009 A Priority for US President Obama

The goal of an economic stimulus check is to give money to individuals, who will then go out and spend the money. But how effective is a check to every American toward stimulating the economy?

Lame Duck Session

In the few remaining weeks of this Congressional session and the Bush Administration, under consideration is a $100 billion bill which would extend help to states that have cut spending, increase food stamps, and allow extra unemployment benefits (Uchitelle & Calmes, 2008).
Democratic congressional leaders suggest the passage of two bills, one in this lame duck session, and a second larger bill after the inauguration for $150-$200 billion (Lightman, 2008).

The Effectiveness of a Stimulus

According to the Economist, the $92 billion in tax rebates which Americans received in July led to a growth in consumer spending of 1.7%.
This growth took place even as consumers managed high gasoline prices, unemployment, and tightening credit.
Without the stimulus, consumer spending may not have grown at all (Economist, 2008).


Limitations of a Stimulus

Macroeconomic Advisers, an economic forecasting firm, estimates that consumers spend only 30% of their checks, applying the remainder to debt or savings.
Other options include investment in infrastructure (such as roads, bridges, tunnels, etc.), assistance to state and local governments who may have to cut services to balance their budgets, and direct help for Americans through extension of unemployment, heating assistance, and food stamps.
However, the Congressional Budget Office estimates that the money for infrastructure development is generally spent at a rate of less than 30% per year, and funds given to states may also be saved by those states.
Therefore, it may be as effective to increasing consumer spending to give funds directly to the individuals (Economist, 2008).


Obama’s Stance

Even before Barack Obama was elected president, he supported the proposed economic stimulus.
He has also suggested an “emergency energy rebate”, $500 to every worker or $1000 for every family, paid for by a tax on the oil companies.
As reported by the New York Times, the economic stimulus would require at least $200 billion dollars.
Obama’s representatives want the checks to arrive before tax returns are filed in April (Uchitelle & Calmes, 2008).

Conclusion

An economic stimulus appears likely, as it has the support of the president-elect and the outgoing and incoming Congress. If it can stimulate consumer spending as the July stimulus did, it may have its intended effect of helping to stave off further recession.

source

Economist. (2008). The Economy: In Need of More Band-Aids. The Economist.
Available:
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=12066188 [2008,
November 9th]
Lightman, D. (2008). Can a $100 Billion Stimulus Save a $14 Trillion Economy? McClatchy
Newspapers. Available: http://www.mcclatchydc.com; [2008, November 9th].
Uchitelle, L., & Calmes, J. (2008, November 5th). A Towering Economic To-Do List for Obama.
New York Times. Available: www.nytimes.com/2008/11/06/business/06challenges.html [2008,
November 9th].


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