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Like it or not, here comes more stimulus


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  • Like it or not, here comes more stimulus

    Here We Go Again, Boy's and Girl's.

    There's a push to extend some expiring provisions from the American Recovery and Reinvestment Act. But it will be done in bits and pieces.

    NEW YORK (CNNMoney.com) -- You won't see it all in one neat package. And you won't hear the White House call it stimulus.

    But there's a good chance lawmakers will decide to extend some of the stimulus measures included in the $787 billion economic recovery package passed in February and possibly create some new ones as well.

    On Wednesday, House Democrats are convening a forum of economists to debate the state of the economy, with a specific focus on job creation. And lawmakers are convening hearings on Capitol Hill this week to discuss the economic outlook and the state of the housing market.

    A number of ideas on the table are lifeline measures, while some are flat-out incentives to spur economic activity.

    Here's a rundown of what's under consideration, estimates of what the provisions might cost and where they stand currently in the legislative process.

    Unemployment benefits extension
    By year-end, an estimated 1.3 million jobless workers will have run out of unemployment benefits, according to the National Employment Law Project.

    It's expected that lawmakers won't let that happen.

    The House has already approved an extension and the Senate has amended it but not yet voted on it. Both parties say they want to extend benefits but they disagree over how to pay for it and how to handle amendments to the bill.

    In the Senate proposal, unemployment benefits would be extended by up to 14 weeks in every state and then another six weeks on top of that in states where the unemployment rate tops 8.5%.

    Currently, states with unemployment rates topping 8% now offer up to 79 weeks of unemployment benefits, said Chad Stone, chief economist of the liberal Center for Budget and Policy Priorities. States with unemployment rates between 6% and 8% now offer up to 59 weeks. And all other states currently offer up to 46 weeks.

    Estimated cost: $2.4 billion. But Senate Democrats say the proposal would be paid for in full by extending an add-on tax for employers under the Federal Unemployment Tax Act.

    For the past 32 years, employers were required to pay an additional 0.2% on the first $7,000 of a worker's annual wages on top of the 0.6% they normally pay, said George Wentworth, a policy analyst for NELP. That surtax was supposed to expire this year. But lawmakers would extend it through June 30, 2011, to pay for the benefits extension.

    If they do, the Congressional Budget Office estimates such a move could reduce the deficit by $200 million over 10 years.

    Cobra premium subsidy extension
    The White House supports extending the federal subsidy now offered to unemployed workers who opt to continue their health insurance coverage from their former employers.

    Under the original provision passed under the economic recovery act, Uncle Sam agreed to pick up 65% of the cost of the Cobra premium for up to nine months for workers laid off between Sept. 1, 2008, and Dec. 31, 2009.

    That 65% comes close to replicating the share of the premium typically paid for by employers when a worker signs up for coverage.

    To date, a Cobra extension has not been attached to any proposed legislation.

    Estimated cost: The original provision was estimated by the CBO to cost roughly $25 billion. Absent the exact parameters for an extension, however, it's too early to tell how much the provision would cost.

    There will likely be a cost to employers as well. The publication Business Insurance reported recently that companies typically pay out $1.50 in claims for every $1 collected in Cobra premiums.

    Emergency payment to seniors
    To compensate for the fact that there will be no cost-of-living adjustment made to Social Security benefits in 2010 due to a lack of inflation, President Obama has proposed sending a $250 economic relief payment to seniors, veterans and the disabled next year. It would be identical to the $250 emergency payment sent out earlier this year under the economic recovery law.

    Democratic leaders in the House and Senate have voiced their support for such a payment.

    But others don't think it's a good idea. The Committee for a Responsible Federal Budget notes that the cost-of-living adjustment for 2009 was much higher than average -- 5.8% -- due to record energy prices. So "even holding Social Security benefits steady means they will have increased in value. There is no economic or moral justification for increasing them further," said CRFB president Maya MacGuineas in a statement.

    To date, a proposed emergency payment to seniors has not been attached to any legislation.

    Estimated cost: The measure would cost $13 billion, according to White House estimates.

    Homebuyer tax credit expansion
    An estimated 1.4 million tax filers to date have taken advantage of a temporary first-time homebuyer tax credit aimed primarily at people making less than $75,000 ($150,000 for joint filers). An estimated 15% of them bought their home specifically because of the tax break.

    The latest iteration of that credit is worth $8,000, and it's scheduled to expire on Nov. 30.

    Many lawmakers want to extend that deadline, expand eligibility beyond first-time homebuyers and include those who make more than is allowed under the current rules.

    Sen. Johnny Isakson, R-Ga., and Sen. Chris Dodd, D-Conn., co-sponsored an amendment to the unemployment extension bill that would extend the credit until the end of June 2010 and be available to single filers making up to $150,000 and joint filers making up to $300,000.

    The amendment may or may not remain attached to the unemployment bill -- which has been stalled due to political skirmishes between Democrats and Republicans. But Congress Daily reports that senators and aides "said both [measures] appear likely to clear the chamber in some form this fall."

    It's still not clear where the White House stands. At a Senate Banking hearing on Tuesday, Housing Secretary Shaun Donovan said "within a few weeks we'll have sufficient data to get to a conclusion on this."

    Estimated cost: The Isakson-Dodd bill is estimated to cost $16.7 billion. Isakson said at the Senate Banking hearing that he'd be happy to look for ways to pay for it and Dodd concurred. Typically, if a measure is considered stimulus it is not something that lawmakers feel obligated to pay for by either reducing spending or raising revenue in other areas.

    Jobs credit creation
    Although no formal proposal has been made, there has been some talk of creating an employer tax credit for hiring new workers.

    The idea is to spur job creation and to do so in the face of forecasts for a 10% unemployment rate in 2010.

    But it's hard to do that without rewarding companies that were already planning to hire anyway, said Clint Stretch, managing principal for tax policy at Deloitte Tax.

    Consider two competitors who dealt with the downturn differently, Stretch said. One made deep cuts to its workforce and is ready to ramp up again, while the other cut costs but managed to do so without laying off too many people. In this instance, the first company benefits far more from the credit than its competitor.

    A hiring credit was put in place during the Carter administration and the consensus among researchers is that two-thirds of the 2.1 million jobs created by the credit would have been created without it, according to a post on Tax Vox, a blog of the Tax Policy Center edited by Howard Gleckman.

    "Tim Bartik [of the W.E. Upjohn Institute for Employment Research] and John Bishop [of Cornell University] ... argue it nonetheless created 700,000 new jobs in a year - not bad, even if a lot of money was wasted. Others insist the research they used is flawed," Gleckman noted.

    Estimated cost: Bartik and Bishop estimate that a job creation tax credit that refunds to employers 15% of new wage costs in 2010 and 10% in 2011 could create 5.1 million jobs at a cost of $27 billion, or $5,400 per new job created.

    There are no stupid questions, but there sure are a lot of inquisitive idiots.

  • #2
    It will be very hard to get this through Congress now that the panic has subsided and people are concerned about the deficit.
    Facts do not cease to exist because they are ignored. -- Aldous Huxley
    Two things are infinite: the universe and human stupidity. -- Albert Einstein


    • #3
      Maybe its time to drop the capital gains tax and reduce the corporate tax rate While we at it, ditch the AMT. How about a two year 0% capital gain and 20% corporate tax rate ( both identical to China)?

      Do something to get business rolling.


      • #4
        What would be the consequences of these proposals?

        All taxes discourage economic activity. Why not abolish all taxes while we are at it? Then we could have a government like Somalia's. Everyone would be free from government interference.
        Facts do not cease to exist because they are ignored. -- Aldous Huxley
        Two things are infinite: the universe and human stupidity. -- Albert Einstein


        • #5
          Originally posted by DAL View Post
          What would be the consequences of these proposals?

          All taxes discourage economic activity. Why not abolish all taxes while we are at it? Then we could have a government like Somalia's. Everyone would be free from government interference.
          I'm all about having our taxes in line with or better than our competitors. Its pitiful to have a 39+ % corporate tax rate while our European counterparts are moving to 25% and realizing the benefits of a lower tax rate.


          • #6

            If you total the taxes I'm paying in this freakin state, the approximate average is 28%.

            Then add to that the fact that the gov. just keeps printing money and driving up inflation, I simply can't even afford to live. Our food expenses have gone up over 33% in the last year. Gas prices are outrageous and in my area are back on the rise... up .17 in the last 2 weeks. Our heating and electric costs have risen every year. Everybody keeps raising prices to make up for their defecit and yet we can't increase our income that way. I've worked 21 hours of over time this week, just to make ends meet and I'll still be short by about $80. I'm going to have to start buying my groceries with a credit card just so I can pay other bills...... and I've never been a credit card debt carrier. Our only debt is mortgage, 1 car and some student loans. We eat out very little, we don't buy new cloths, we have no entertainment budget. The only luxury we have is this internet and basic cable... and we may not for much longer.....

            AND I know that we are only 1 family of millions going through the exact same scenario...

            AND THIS LOUSY administration wants to make it even worse with more of this crap!

            Absolutely AWEFUL.... and this DEMOCRATIC congress and SOCIALIST president want to make it worse!!!
            Last edited by Driven; 10-22-2009, 08:09 PM.
            "Rulers are not a cause of fear for good behavior but for evil behavior. Do you want to have no fear of authority? Do what is good and you will have praise from the same." ~~ God


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