Economic Stimulus Package

Economic Stimulus Package

(My intended audience for this article is middle aged Liberals. I attempted to use a formal word choice. I thought that using numbers and charts would be more relatable to other people. I feel that because of the plain tone I used in the paper that it came off as being very boring.)

It is one of the most debated topics at this moment. When will the recession be over? It is a question that everyone wishes they had the answer to. One of the first things Barack Obama did while being elected into office was issue the Emergency Economic Stabilization Act of 2008 or
better known as the stimulus plan. In my opinion the stimulus plan was a response to the economy that gave the United States Secretary of the Treasury power to make a $700 billion plan to give money to mortgage companies, and to insert money into some of the banks. In my
opinion the governments’ stimulus package is a failure because we are still in a recession. Even though the stimulus package has created some jobs the unemployment rate in the United States is still at a high 9%. I feel that with my extensive amount of research that I have enough proof to
show why the stimulus package has been a failure. Some of the reasons I have to back this up are the bank bailouts, the bad economy, and the deficit for the future generations.

One of the big reasons for the stimulus package being a failure is because of the bailouts to banks. A very good article explaining the bailouts more in-depth is “Financial Bailout” which is written by Thomas J. Billitteri. Billitteri describes how the government acquired mortgage
companies Fannie Mae and Freddie Mac. These companies combined accumulate $5.4 trillion in loans. Almost all of the loans are mortgage loans that accumulate for approximately forty-five percent of the total by the world. The government put $250 billion to banks directly. This was aimed for banks to start lending to one another again which it a vital part to stop the nation’s credit woes. Another important event was when the Treasury Department would let the Lehman Brothers Holdings to go bankrupt. The Treasury Secretary, Henry M. Paulson Jr read a statement saying that there would be no more bailouts by the government. Paulson later said “I am confident in the resilience of our capital markets, and in the commitment of the United States regulators and market participants to work together through this difficult period.” The New York Times reports that about 45 percent of the nation’s total and Fannie Mae during 2005 and 2008 guaranteed at least $270 billion in risky loans. Another example is when Barry Ritholtz, a Wall street analyst said “one you bail out Lockheed for $250 million under the guise of national defense, it’s a short line to Chrysler and to the S&L crisis and to Fannie and Freddie. It just gets worse and worse.”

These all show why the economy is the way it is right now. Another part of the stimulus package was to revive the housing market. There are many reasons why the financial system has nearly collapsed. One reason could be the horrible real estate market that had record low interest rates. This caused a huge housing market question that let even people with bad credit to refinance on homes. This was a huge gamble that didn’t pay off because millions of homeowners were found owing a lot more money than their homes were actually worth. This led to an increase in mortgages and foreclosures. Marvin Feldstein who is a chairman of the Council of Economic Advisers in the Regan administration and now a Harvard economics professor, said the bailout plan “does nothing to stop” what he called the fundamental cause of the crisis: the downward spiral of house prices that devastates household wealth and destroys the capital of financial institutions that hold mortgages and mortgage-backed securities.” Feldstein later said a successful economic plan “must do more than buy back impaired debt from financial institutions.” Feldstein later argues that “a system of limited federal mortgage-replacement loans for struggling borrowers would break the downward spiral of house prices.” I believe that Feldstein made a lot of interesting points and shows what the real estate market has done to the economy. A huge final part of the stimulus package is the cash for clunkers which gave $800 for first time home buyers a tax credit. The federal tax deduction comprised in the stimulus will put in (or rather, not take out of) your pocket the sum of $400. This is money the government normally would have taken out of your salary that you are now allowed to keep. It’s the same amount you will receive in 2009, only divided along 12 months instead of 9. This, in case you meet all the requirements and benefit from the full tax deduction. The new economic stimulus package will certainly minimize the problem of higher tax rates and debts in few sectors. American government has already borrowed fund from different ME countries like Saudi Arabia and other countries like UK.

For this reason, the White House wants to reconstruct the country’s economy by releasing grants, loans, financial aids to various commercial sectors, institutions and organizations. Even American house owners, layman’s class and other citizens are getting benefits. The new tax cut policies will exempt people from paying taxes on their paychecks, food and healthcare related projects. Even unemployed youths will get easy to care loan and grants for starting small downstream projects. Students have also been covered under the updated financial stimulus package.

In conclusion all of the following are reasons to show why the stimulus plan has been a failure so far. Whether you are a Liberal or a Conservative I think that its easy to understand the point of view. Even if you might not straight agree with all of the points I feel that its easy to say that I made a good argument.

Works Cited

Billitteri, Thomas J. "Financial Bailout." CQ Researcher Online 24 Oct. 2008: 865-888. CQ
Researcher. Web. 7 Nov. 2010.< http://library.cqpress.com/cqresearcher>.

Cranford, John, Clea Benson, and Benton Ives. "Beyond the Bailouts." CQ Weekly Online 22
Sept. 2008: 2496-2503. CQ Weekly. Web. 7 Nov. 2010.< http://library.cqpress.com /cqweekly>.