For those of you who have not seen the movie or at least the previews to “The Curious Case of Benjamin Button” the basic story line entails a man who begins his life at a very old age and proceeds to age backward getting younger and decreasing in age every day. I fear this story line is that similar to what we are currently seeing in the market as well as market confidence. Consumer confidence and market levels have slowly faded us back to levels we were seeing in the early 1980s. It‘s as if we are living the life of Benjamin Button.
The current stimulus package that is to be voted on today will determine the future of our market, but we are not sure that this package is all what it is made out to be. The original package President Obama talked about just after being elected was to include money allocated toward shovel ready jobs. This plan was supposed to be that similar to what FDR proposed back in the late 1930s (See The New `New Deal‘ written in late November). Instead it seems we are getting most of our money in the form of tax cuts and aid. Spending money to go directly to job creation only makes up approximately 24% of the roughly $800 billion dollar package.
Republicans have expressed their dissent with regards to this bill as they feel there is too much money spent on cash injections that will not support long term economic viability. Many have described the plan as a sugar high that will eventually wear off and produce a crash like effect. Obama and his team seem to be more concentrated on controlling or stopping the bleeding rather than investing in America‘s future.
Confidence needs to be re-established within our nation and the only way to do that is to provide Americans with a source of sustainable income. Lowering mortgage rates, distributing rebate checks and providing tax cuts are all great things, but will be short lived if the unemployment rate continues to climb. Although consumers may feel less stress in the short run as their liabilities decrease they still will not be willing to spend money without perpetual income.
Noteworthy expenditures in the $780 billion dollar bill include:
- $87 Billion to temporarily increase federal funding for Medicaid to states
- $116 Billion to payroll tax credits to those individuals making less than$75k or $150k combined
- $69 Billion to patch the Alternative Minimum Tax so that middle income families are not effected
- $40 Billion to aid schools in balancing budgets
- $30 billion in modernization of the energy grid and energy efficiency grants
As you can see much of this bill is focused on satisfying citizens in the short run rather than job creation. As America and other nations around the world continue to invest in their countries future we fear that country will become economically inferior with only short term patches versus long term investments.
To see a summary of the stimulus plan click HERE