Between new Treasury Secretary Timothy Geithner's plan to rescue banks and the stimulus bill that made its way through Congress, trillions were allocated to lift the country out of its economic mire. Here's a **quick** recap:
Geithner's plan gets panned
He may be the man with the plan but Wall Street didn't like it. The market fell almost 400 points following his remarks Tuesday as critics panned the blueprint to spend $2.5 trillion for being too big and too vague. Investors were looking for clarity specifically on how to handle all those toxic home loans that we've been talking about, endlessly it seems, for months and months, that continue to clog up the bank lending system.
Geithner and the administration want to combine about $1 trillion in public and private money to buy these assets--the bad bank of sorts--but many see the private side as a big gamble because it's a lot of risk to take on, and the upside or return on the investment is not a sure bet.
The plan also calls for using $50 billion to help struggling homeowners. New details suggest the government may be willing to buy loans from people who can’t pay their mortgage, meaning the government owns the loan, and then they'll refinance it in a way that could help keep the person in his home. See a breakdown of the spending of the $2.5 trillion.
A stimulus plan for you!
After weeks of talk and debate, bailout programs for banks and car companies, finally, a stimulus plan--for you! Here's a cheat sheet on what all was cut in the blended House/Senate version, which is now on view for 48 hours to the public (be careful, it’s about 1,000 pages long).
Total bill: $787 billion, less than both the House and Senate versions
Total spending: about $500 billion
Total tax cuts: $286 billion
Major points in the package, as details still emerge:
- Tax cuts: $400 for individuals, $800 for families
- $70 billion to help middle-income earners avoid the Alternative Minimum Tax this year, a tax designed in 1969 to prevent millionaires from finding ways to minimize their taxes too much but that grew over time to ensnare people with incomes as low as $30,000.
- $8,000 tax credit for new homeowners this year (unclear if it will have to be paid back?)
- $250 one-time payment for people who receive social security
- Education spending was cut fairly significantly form the House proposal, probably about half of what it was, around $50 billion
- $64 billion in infrastructure spending (highways, bridges and high-speed railways)
Feel free to add other line items you find interesting here.
The big picture
All of this is still tough to wrap one's brain around. The numbers are big and the returns are unknown, both financially for the taxpayer and for some of the promises. President Obama says the stimulus plan will create 3.6 million jobs, but that number isn't a sure thing. Some worry the plan is too small while others worry it’s too big. Regardless, Wall Street certainly wants some firm plans so the market can start regaining confidence, probably something everyone is looking for a bit of at this point.
Discussion thread - we started a discussion this week on responsibility, examining the role of individual and collective responsibility in society, particularly in light of the economic crisis. We’re getting interesting comments and we’d love to hear what you think about responsibility.
Also: Keep up with the recession on this new pop-up site, www.recessionwire.com!
