Amidst one of the worst economic downturns since the Great Depression, President-elect Barack Obama released information this week about his stimulus plan intended to put money into the pockets of average Americans and small businesses.  The plan, coined by Obama as the American Recovery and Reinvestment Plan, could cost as much as $775 billion.  Economists have suggested that the plan needs to be closer in the range of $1 trillion if Obama hopes to break the current economic downturn.

While politicians argue over the specifics of the stimulus package, Obama has stated that he wants to sign a bill in late January or early February following his inauguration.  Though the President-elect’s intentions are noble, with the squabbling senate, it’s possible the bill won’t be ready in time.  In his weekly radio and video address, Obama stated:

Economists from across the political spectrum agree that if we don’t act swiftly and boldly, we could see a much deeper economic downturn.

The need for haste is paramount for the economic stimulus plan, as recent figures place job losses for 2008 upwards of two million while investors suffered the worst year in stocks since the Great Depression. 

The specifics of Obama’s plan include $300 billion in tax cuts for regular Americans in the middle and lower class.  The plan differs from the tax rebates of 2007 because it would add an extra $20-40 to the twice-monthly checks of working Americans, spreading the money out over the course of the next two years instead of providing a direct sum of cash.  Obama’s plan would provide long-term relief to all working Americans, and with the complications that arose from millions of missing or late rebate checks last year, it seems like a solid idea to provide aid. 

In addition to tax cuts for working Americans, Obama is considering a tax cut for businesses that record losses in 2008 and 2009, and the establishment of a new credit for businesses that create jobs in the United States or avoid layoffs.  Obama also intends to provide significant aid to small businesses, doubling the amount of expenses small businesses can write off to $250,000 from $125,000.  Through offering tax breaks to businesses, Obama hopes to strengthen support from Republicans still reticent to back the bill.  Hoping to unite the contested political parties, Obama stated:

This is not a Republican problem or a Democratic problem at this stage, it is an American problem, and we’re going to all have to chip in and do what the American people expect.

Obama said he also plans to propose a number of significant changes in addition to the tax cut for workers and businesses.  These changes include doubling renewable energy production, making public buildings more efficient, rebuilding dilapidated roads, bridges, and schools, computerizing the health care system, and modernizing classrooms, labs, and libraries.  The goal of these changes is to create three million jobs, most coming from the private sector, with a long-term goal of fostering economic growth and competitiveness.  

There’s a palpable sense of urgency in Washington, but specifics on Obama’s plan are still scarce, other than the broad stroke outline provided by the President-elect himself.  It’s not clear what shape the American Recovery and Reinvestment Plan will take by the time it reaches Obama’s desk as the President of the United States.  In reference to the need for cohesive input from members of both political parties, Senate Majority Leader Harry Reid stated:

I want to make sure that all senators have some input in what goes on here, and that we do it as quickly as we can.

Questions linger about whether the plan will work, or whether Obama is simply ‘throwing money’ at the problem.  While the long-term goals of the plan are sound, it could be lacking in short term relief.  Providing government tax breaks on a paycheck to paycheck basis would have been a great idea in 2007, but for the millions of homeowners who are behind on their payments and need $500-1000 to prevent losing their home this month, the relief just isn’t there. 

Most economists, and even Obama himself, have stated that the economy “is going to get worse before it gets better” and it seems more logical to have relief during the worst of the downturn rather than during the months down the road.  The $300 billion in tax cuts is the only proposed aid that will have a direct effect on working lower and middle class Americans; shouldn’t it target those who need it most?  This and other questions will need to be answered before the stimulus package is approved by Congress. 

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