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The Daily Wildcat

The Daily Wildcat

 

    Obama’s stimulus plan flawed but promising

    Now that President Barack Obama holds the reins of power, people all over the world are expecting big things. The first major piece of legislation that his administration wants to push through is a stimulus package. Officially titled the “”American Reinvestment and Recovery Plan”” is aimed to cushion, not stop, this economic crash. It consists of a wide variety of tax cuts and government spending, including helping out states in an effort to prevent service cuts, like education.

    The package currently carries an $820 billion price tag in a time when trillion dollar deficits are expected for the next few years, so some are understandably questioning whether now is the proper time for such massive spending. Unfortunately, it doesn’t look as though we have much of a choice; if we do nothing, the rapidly deteriorating situation will continue feeding off itself with even more catastrophic consequences.

    There’s a lot of uncertainty among consumers, which has slowed spending and investment. People are losing their jobs and a good portion of those who have not lost their jobs are unsure if they will continue to have one for long. Such uncertainty prevents people from buying cars and houses, especially with the crash in home values, which leaves people debating if we have hit bottom. This cloud of doubt instinctively makes people trim their budgets, reducing demand for goods all around. Which in turn causes businesses to go under which leads to more layoffs and declining tax revenues. The stimulus package is a temporary but sorely needed boost to see us through the worst of this downturn.

    It might seem grossly irresponsible to spend nearly a trillion dollars we don’t have, but there are a lot of worthy elements to the plan, especially for the students and faculty here. It will fund the shortfall in Pell grants and increase their cap by $500. The package will also introduce a $2,500 tax credit for students who are willing to volunteer in their communities or do some other public service. One of the explicitly stated goals of the package is to “”Prevent teacher layoffs and education cuts in every state…”” which should have some obvious implications for this school.

    Those proposals are merely for the education section of this bill. There are also provisions to improve thousands of miles of infrastructure in roads and bridges, double renewable energy in three years, and to computerize health records. The whole package is in essence a worthy investment for our future that has the added side effect of slowing this recession down. Many of the effects will be around well after the recession concludes and that is good public policy.

    Over $200 billion of this plan will be allotted for tax cuts. While some might argue against giving tax cuts to those who do not pay federal income tax, the fact is the vast majority of the proposed tax cuts are based on the Federal Insurance Contributions Act (FICA)/payroll tax. In truth, the FICA tax is a regressive one, so poorer people pay a greater percentage of their income toward it than wealthier people do. That said, and taking our economic situation into consideration, it would make sense to put money in the hands of people who are most likely to spend it: the poor.

    While there are very legitimate objections to the president’s plan, it would seem the cost of doing nothing is much greater than the cost of this package. We will most assuredly be paying for these initiatives decades down the road because of what it will do to the deficit. However, the declining economy could lead to even larger budget shortfalls that would make the currently forecasted ones miniscule by comparison. This would probably happen while services would be drastically reduced, likely including federal financial aid and state’s public universities.

    While the cost for this plan is indeed astronomical, there seems to be little choice but to get behind the plan and hope for the best. What if it doesn’t work? Well, at least we’ll be out of school by then.

    -ÿJavier Espitia is a political science sophomore. He can be reached at letters@wildcat.arizona.edu.

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