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Where’s the Money Going in Obama’s Stimulus Package?

February 23, 2009 | Financial Tips | No Comments

After much debate, President Barack Obama’s $787 billion economic stimulus package was finally by Congress. The package calls for spending $185 billion this year, which should increase GDP (Gross Domestic Product) by 1.4% to 3.8% and create 1 to 2 million jobs. The plan is to shorten the recession, which is defined by a negative GDP growth. The stimulus package should also calm the stock market.

So what does the stimulus package actually cover? Below is a basic breakdown of 7 areas of where the money will be spent.

Relief for Families – $260 billion over 10 years

  • $2,500 college tuition tax credit
  • $8,000 tax credit for first-time homebuyers in 2009
  • A tax deduction of sales tax on new car purchases
  • Extension of unemployment benefits
  • Suspension of taxes on unemployment benefits through 2009
  • Reduce taxes by $400 for individuals and $800 for families
  • Pay $250 to each recipient of Social Security, veterans pension and SSI benefits
  • $70 billion to continue the Alternative Minimum Tax (AMT) tax shelter
  • For the working poor Greater access to child tax credit
  • Expand earned-income tax credit to families with 3 children


Expand Health Care

  • $24 billion: Subsidize COBRA benefits for laid off workers
  • $87 billion: Assist states with Medicaid
  • $10 billion: National Institute for Health
  • $17 billion: Modernize health (IT) information technology systems


Improve Education

  • $54 billion: School districts and states
  • $21 billion: School modernization
  • $17 billion: Increase Pell Grants
  • $13 billion: Head Start
  • $12 billion: Special Education programs


Modernize Federal Infrastructure

  • $46 billion: Transportation and mass transit projects
  • $31 billion: Modernize federal buildings
  • $6 billion: Water projects


Increase Alternative Energy Production

  • $17 billion: Renewable energy tax cuts
  • $5 billion: Weatherize homes


Invest in Science Research and Technology

  • $10 billion: Science facilities
  • $4 billion: Increase broadband infrastructure
  • $4 billion: Science research and physics


Assist Small Businesses

  • $54 billion: Assist small businesses by various tax incentives and write-offs


The basic overall plan for spending all this money is to:

  • Encourage consumer spending via tax rebates.
  • Help businesses revitalize the economy, especially small businesses.
  • Assist states from raising property taxes or cutting needed services.
  • Create public works construction to retain or add 3 million jobs, and lower transportation costs.


Once the danger or a recession is over, all incentives should be removed, and then Obama’s plan is to reduce the deficit and avoid future inflation. Only time shall tell if President Obama’s plan will work. The next few months will be very interesting!

 

 

 

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