In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.
Showing posts with label The Mother of All Stimulus Plans. Show all posts
Showing posts with label The Mother of All Stimulus Plans. Show all posts

Monday, June 29, 2009

Romer: Big Stimulus Impact Starts Now

by Calculated Risk on 6/29/2009 10:20:00 AM

From the Financial Times: Romer upbeat on US economy

Ms Romer, chairman of the US president’s council of economic advisers, told the Financial Times in an interview she was “more optimistic” that the economy was close to stabilisation.
...
Ms Romer said stimulus spending was “going to ramp up strongly through the summer and the fall”.

“We always knew we were not going to get all that much fiscal impact during the first five to six months. The big impact starts to hit from about now onwards,” she said.

Ms Romer said that stimulus money was being disbursed at almost exactly the rate forecast by the Office of Management and Budget. “It should make a material contribution to growth in the third quarter.”

But she acknowledged that cutbacks by states facing budget crises would push in the opposite direction.

Ms Romer said the latest economic data were encouraging, following a weaker patch a month ago. “I am more optimistic that we are getting close to the bottom,” she said.
...
But she added: “I still hold out hope it will be a V-shaped recovery. It might not be the most likely scenario but it is not as unlikely as many people think.

“We are going to get some serious oomph from the stimulus, there is the inventory cycle and I believe there is some pent-up demand by consumers.”
I think a normal V-shaped recovery is very unlikely since the two usual drivers of economic recovery - residential investment and personal consumption expenditure - will both be crippled for some time.

Wednesday, February 11, 2009

Stimulus: Homebuilder Tax Break "Sharply Curtailed"

by Calculated Risk on 2/11/2009 07:04:00 PM

More good news on the stimulus bill.

From the WSJ: Big Business Loses Out on Tax Break Under Stimulus Deal

A tax break sought by businesses that would allow unprofitable firms to recoup taxes paid in the past five years has been sharply curtailed ...

Sen. Baucus (D., Mont.) said House and Senate negotiators have agreed to limit the tax break to small businesses only. That means large manufacturers, retailers and homebuilders that lobbied for the provision would be shut out under a deal reached earlier today.
...
Congressional tax estimators said it would have delivered as much as $67.5 billion in tax benefits to businesses this year and next. The provision would have allowed firms to convert 2009 and 2010 losses into tax refunds by carrying those losses back for five years to offset tax liability.
I lobbied hard against both the homebuyer tax credit and the homebuilder tax break, and it looks like both provisions were scaled back sharply.

Housing Tax Credit: "Largely Dropped"

by Calculated Risk on 2/11/2009 04:50:00 PM

From Bloomberg: U.S. Lawmakers Agree on $789 Billion Stimulus Plan

Asked what a proposed $15,000 tax credit for homebuyers looks like in the compromise plan, Baucus laughed and said, “not much.” He said that proposal has largely been dropped, though he didn’t provide details.
We still need the details on what "not much" means, but this is a little bit of good news.

Note: I'm still working on some Google technical issues. This includes the feed not working. Sorry for the inconvenience.

Report: Stimulus Agreement Reached

by Calculated Risk on 2/11/2009 11:20:00 AM

Update: CNBC: Tentative Accord Reached On Smaller Stimulus Plan

The White House and key congressional negotiators have tentatively settled on a $790 billion price tag for President Barack Obama's economic recovery plan, Democratic aides on Capitol Hill said.

The aides said one way negotiators are trimming the measure's cost below the $838 billion plan that passed the Senate Tuesday is to pare back Obama's signature "Making Work Pay" tax credit for 95 percent of workers.

This should be cut to $400 a year instead of $500. A married couple would get $800 instead of the $1,000 initially proposed by Obama.
Update: WSJ: Deal Nears on Stimulus Plan
Under the framework coming together, lawmakers would trim the cost of Senate-approved tax cuts intended to spur auto and home sales, but would preserve a measure intended to shield millions of middle-income Americans from the alternative minimum tax, a levy originally designed to hit the wealthy.

Among other things, a signature Obama tax cut—the payroll tax holiday for workers –would be scaled back, under the framework being negotiated.
One headlines says "reach", the other "near" ... It sounds like a deal is close, and the stimulus package will likely be smaller than either the House or Senate versions.

Tuesday, February 10, 2009

Stimulus Package: The Negotiations Begin

by Calculated Risk on 2/10/2009 09:10:00 PM

The House and Senate stimulus bills are significantly different, and finding a compromise will probably be difficult.

From the WSJ: Obama Seeks to Restore Spending to Stimulus Plan

The White House is seeking to restore funding cut by the Senate for schools, health insurance and computerizing health records as the economic-stimulus plan heads for a final round of negotiations in Congress this week.
...
To make room for added spending, the White House, joined by House Democratic leaders, is pressing to scale back certain Senate-passed tax breaks, including ... an $11.5 billion proposal to give car buyers a tax deduction covering local sales taxes and interest on auto loans, and a $35 billion proposal to create a new tax credit for home purchases.
The $35 billion tax credit is probably the least useful provision in the Senate stimulus bill.

Here is one of my posts on this provision: The Homebuyer Tax Credit

And here is Professor Kash Mansori on the impact of the tax credit on house prices: Will a Home Purchase Tax Credit Help Boost House Prices?

This tax credit will not stabilize house prices, has very limited stimulative impact, and it will mostly go to home buyers who would buy anyway. Hopefully it will be removed in conference.

U.S. Senate Approves Stimulus Plan

by Calculated Risk on 2/10/2009 12:41:00 PM

The Senate has approved their version of the stimulus package. The vote was 61 to 37.

There are significant differences between the House and Senate bills, and this might cause some problems in gaining final approval.

For a chuckle, from Krugman on the bailout:

I was going to dub the new financial plan TANF 2 — temporary assistance to needy financial institutions ... But Jamie Galbraith (private communication) has trumped me; he says it’s the Bad Assets Relief Fund.

Sunday, February 08, 2009

Summers: Bank Bailout Announcement Delayed until Tuesday

by Calculated Risk on 2/08/2009 11:02:00 AM

From ABC News: 'This Week' Transcript

STEPHANOPOULOS: Let me ask about that financial overhaul. Originally, Secretary Geithner was supposed to give that speech tomorrow. Administration officials are telling me it's now more likely on Tuesday?

SUMMERS: Yes, I think there's a desire to keep the focus right now on the economic recovery program, which is so very, very important.

STEPHANOPOULOS: So Tuesday it is.
And on the Stimulus Package:
STEPHANOPOULOS: Let me start out by putting up a little chart that shows the House and Senate versions of this stimulus package. Let me show our viewers that right now. The overall cost is about the same, the House $820 billion, Senate $827 billion, but the composition different. The Senate has about $100 billion more in tax cuts, but $40 billion less in state aid, $20 billion less in education, $15 billion less in payments to individuals, some other differences.

I know that, when the president was meeting with these moderate Republican senators this week, including Senator Susan Collins of Maine, he told them he endorsed their efforts to scrub the bill of what they called excessive spending. Does that mean the president prefers the Senate version to the House version?

SUMMERS: No, the president feels that, above all, we need a major program enacted very quickly that will create 3 million to 4 million jobs. He believes we need to perfect it in every way we can.

If there are programs that aren't going to serve important purposes, they should be -- they should be eliminated. He certainly believes that. He's open to good ideas from both -- from both sides.

But we're going to have to look at both these bills, assuming the Senate bill passes, as most people expect at this juncture, and craft the best possible approach going forward.
...
STEPHANOPOULOS: Some of the critics of the Senate bill say that the most important elements have been -- have been brought down. Paul Krugman, writing on his blog this morning, said, "Some of the most effective and most needed parts of the plan have been cut." He's citing especially that $40 billion in state aid.

And he goes on to say that, "My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years."

SUMMERS: There's no question we need -- we need a large, forthright approach here. There are crucial areas, support for higher education, that are things that are in the House bill that are very, very important to the president.

STEPHANOPOULOS: But will the Senate bill produce fewer jobs?

SUMMERS: There's no question -- no question what we've got to do is go after support for education. And there are huge problems facing state and local governments, and that could lead to a vicious cycle of layoffs, falling home values, lower property taxes, more layoffs. And we've got to prevent that.

So we're going to have to try to come together in the conference. And the president is certainly going to be active in sharing his views as that process -- as that process...
And on the economy:
STEPHANOPOULOS: Let me -- let me get to the state of the economy, because some economists have been even more alarming than you are right now.

STEPHANOPOULOS: This week, two economists, the president of the Federal Reserve Bank of San Francisco, Janet Yellen, said, "I think we do have the same type of dynamics taking place that do happen in a depression." The managing director of the IMF, Dominique Strauss- Kahn, was quoted in Bloomberg News as saying, "Advanced economies are already in a depression, and the financial crisis may deepen unless the banking system is fixed. The worst cannot be ruled out."

Already in a depression?

SUMMERS: We're in a very serious situation, George. This is worse than any time since the Second World War. It's worse than I think most economists like me ever thought we would see.

But let's remember. In the Depression, the unemployment rate was 25 percent. GDP had fallen in half. We were really in a very different situation than that.

But all of this concern -- the risks of deflation, for example -- points up the importance of acting as aggressively as we can. That's why the president's economic recovery program is so important. That's why it needs to be twinned, as it will be this week, with the financial recovery program directed at shoring up the flow of credit so that people can get the loan to buy a car...

STEPHANOPOULOS: Let me -- let me ask you about that.

SUMMERS: ... so that we can address the problem which has, frankly, gone unattended for much too long of declining house prices.
I hope Summers understands that house prices are still too high by most measures and need to fall further. On the question of depression, the answer is no, although the Senate appears to be trying for one!

Saturday, February 07, 2009

The Competing Stimulus Bills

by Calculated Risk on 2/07/2009 11:25:00 PM

From the NY Times: Congress Is Divided Over Competing Stimulus Bills

The price tag for the Senate plan is now only slightly more than the $820 billion cost of the measure adopted by the House.
...
But the competing bills now reflect substantially different approaches. The House puts greater emphasis on helping states and localities avoid wide-scale cuts in services and layoffs of public employees. The Senate cut $40 billion of that aid from its bill, which is expected to be approved Tuesday.

The Senate plan, reached in an agreement late Friday between Democrats and three moderate Republicans, focuses somewhat more heavily on tax cuts, provides far less generous health care subsidies for the unemployed and lowers a proposed increase in food stamps.
This might be a serious problem since the differences are significant.

Friday, February 06, 2009

Senate Reaches Deal on Stimulus Package

by Calculated Risk on 2/06/2009 08:11:00 PM

From the WSJ: Senate Leaders Reach Compromise on Stimulus Plan

Senate Democrats have struck a deal on a $767 billion economic stimulus package, several senators said Friday.

The deal is expected to bring on enough Republicans to ensure support of passage in the Senate, which will likely require 60 votes. Sen. Sherrod Brown (D., Ohio) told reporters late Friday, "We have a deal."
...
The size of the package has been reduced to around $767 billion from the original $885 billion plan the Senate brought to the floor on Monday, Sen. Kent Conrad (D., N.D.), the chairman of the Senate Banking Committee said.

The spending side has been reduced from $349 billion to $263 billion, while the tax credits have been reduced from $342 billion to $324 billion, Conrad said.
It sounds like the ill-conceived homebuyer tax credit made the cut, as CNBC reports:
Senator Kent Conrad, a Democrat from North Dakota, said measures including a homebuyer tax credit and auto tax credit would remain in the final package.
We need to see the details, but it sounds like they made the package smaller and the composition worse.

Thursday, February 05, 2009

Stimulus, Bailout and Employment Report

by Calculated Risk on 2/05/2009 07:34:00 PM

Just a summary post:

  • The Senate could vote on the stimulus plan tonight. The bank bailout plan will be announced on Monday by Secretary Geithner. President Obama will then hold a press conference at 8 PM on Monday.

    A couple of stories:

    From the NY Times: Democrats Ready to Press Ahead on Stimulus Vote

    From Reuters: Geithner says must avert future crises
    The Treasury chief is to make the administration's proposals for reinvigorating the financial system public in a speech on Monday, though no details about when and where it will be delivered were yet available.
  • The employment report will be released tomorrow morning. It will probably show close to 500 thousand jobs lost in January and the unemployment rate rising to 7.5% or so.

    Employment related stories this week:

    The DOL reported tody: Unemployment Claims Highest Since 1982

    From MarketWatch: Monster Employment Index Declines in January
    Index dips 13 points as online recruitment activity slows for the fourth consecutive month

    Year-over-year, the Index was down 26%, a more negative pace than that seen during the previous three months, suggesting further deterioration in labor market conditions to start 2009
    From ADP:
    Nonfarm private employment decreased 522,000 from December 2008 to January 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®
    From Reuters: Planned layoffs in January hit 7-year high
    Planned layoffs at U.S. firms in January reached their highest monthly level in seven years, according to a report released on Wednesday, as the more than year-old U.S. recession took an increasingly heavy toll on employment.
    ...
    Job cuts announced in January totaled 241,749, up 45 percent from December's 166,348. Layoffs were up from 74,986 in the year-ago period.

  • Wednesday, January 28, 2009

    House Passes Stimulus Plan

    by Calculated Risk on 1/28/2009 07:13:00 PM

    From the NY Times: House Passes Obama’s Stimulus Package

    Without a single Republican vote, President Obama won House approval on Thursday for an $819 billion economic recovery plan as Congressional Democrats sought to hold down their own difference over the enormous package of tax cuts and spending.
    ...
    As Senate Democrats prepare to bring their version to the floor on Monday, Democrats from the House and the administration indicated they would ultimately accept a provision in the emerging Senate package that would adjust the alternative minimum tax to hold down many middle-class Americans’ income taxes for 2009.

    The provision, which would drive the overall cost of the package to nearly $900 billion, was not in the legislation passed by the House.
    It sounds like the stimulus package will pass the Senate and be signed into law by mid-Feb. The WSJ has some state by state stats and graphics (for those with access).

    Thursday, January 15, 2009

    Preliminary Plan: American Recovery and Reinvestment

    by Calculated Risk on 1/15/2009 02:00:00 PM

    Here is the plan (PDF file)

    See PDF for details ...

    Here is an overview:

    Clean, Efficient, American Energy: To put people back to work today and reduce our dependence on foreign oil tomorrow, we will strengthen efforts directed at doubling renewable energy production and renovate public buildings to make them more energy efficient.

    • $32 billion to transform the nation’s energy transmission, distribution, and production systems by allowing for a smarter and better grid and focusing investment in renewable technology.

    • $16 billion to repair public housing and make key energy efficiency retrofits.

    • $6 billion to weatherize modest-income homes.

    [CR Note: $54 Billion]

    Transform our Economy with Science and Technology: We need to put scientists to work looking for the next great discovery, creating jobs in cutting-edge-technologies, and making smart investments that will help businesses in every community succeed in a global economy. For every dollar invested in broadband the economy sees a ten-fold return on that investment.

    • $10 billion for science facilities, research, and instrumentation.

    • $6 billion to expand broadband internet access so businesses in rural and other underserved areas can link up to the global economy.

    [CR Note: $16 Billion: $70 billion total]

    Modernize Roads, Bridges, Transit and Waterways: To build a 21st century economy, we must engage contractors across the nation to create jobs rebuilding our crumbling roads, and bridges, modernize public buildings, and put people to work cleaning our air, water and land.

    • $30 billion for highway construction;

    • $31 billion to modernize federal and other public infrastructure with investments that lead to long term energy cost savings;

    • $19 billion for clean water, flood control, and environmental restoration investments;

    • $10 billion for transit and rail to reduce traffic congestion and gas consumption.

    [CR Note: $90 Billion: $160 billion total]

    Education for the 21st Century: To enable more children to learn in 21st century classrooms, labs, and libraries to help our kids compete with any worker in the world, this package provides:

    • $41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).

    • $79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education.

    • $15.6 billion to increase the Pell grant by $500.

    • $6 billion for higher education modernization.

    [CR Note: $141.6 Billion: $301.6 billion total]

    Tax Cuts to Make Work Pay and Create Jobs: We will provide direct tax relief to 95 percent of American workers, and spur investment and job growth for American Businesses. [marked up by the Ways and Means Committee]

    [CR Note: Unknown amount - probably $300 billion]

    Lower Healthcare Costs: To save not only jobs, but money and lives, we will update and computerize our healthcare system to cut red tape, prevent medical mistakes, and help reduce healthcare costs by billions of dollars each year.

    • $20 billion for health information technology to prevent medical mistakes, provide better care to patients and introduce cost-saving efficiencies.

    • $4.1 billion to provide for preventative care and to evaluate the most effective
    healthcare treatments.

    [CR Note: $24.1 Billion: $325.7 billion total]

    Help Workers Hurt by the Economy: High unemployment and rising costs have outpaced Americans’ paychecks. We will help workers train and find jobs, and help struggling families make ends meet.

    • $43 billion for increased unemployment benefits and job training.

    • $39 billion to support those who lose their jobs by helping them to pay the cost of keeping their employer provided healthcare under COBRA and providing short-term options to be covered by Medicaid.

    • $20 billion to increase the food stamp benefit by over 13% in order to help defray
    rising food costs.

    [CR Note: $102 Billion: $427.7 billion total]

    Save Public Sector Jobs and Protect Vital Services: We will provide relief to states, so they can continue to employ teachers, firefighters and police officers and provide vital services without having to unnecessarily raise middle class taxes.

    • $87 billion for a temporary increase in the Medicaid matching rate.

    • $4 billion for state and local law enforcement funding.

    [CR Note: $91 Billion: $518.7 billion total]

    Plus add in about $300 billion for various tax cuts, and that give $818.7 billion (by my count).

    Tuesday, January 13, 2009

    Large Portion of Stimulus Aimed at States

    by Calculated Risk on 1/13/2009 11:07:00 PM

    From the WSJ: Big Chunk of Stimulus Is Proposed to Aid States, Localities

    State and local governments would benefit from more than $160 billion in federal aid ... Under the plan, some $80 billion would be steered toward a new "education stabilization fund," which would be used to help states avoid cutbacks in teachers and classroom programs. An additional $87 billion would be set aside for Medicaid, the federal-state program that helps low-income families and is facing budget constraints.
    A bailout for Arnold?

    In general this seems like a good idea since this keeps states from exacerbating the recession by laying off workers as revenues decline. Unfortunately many states (like California) have structural fiscal problems and were running budget deficits even during the housing boom. These states still need to fix their fiscal problems.