With over 75,000 layoffs announced earlier in the week, the House of Representatives is set to vote Wednesday on a $825 billion economic stimulus package, the American Recovery and Reinvestment Act, HR 1. The plan is said to create or save close to 4 million jobs. The measure is expected to pass relatively easily despite staunch Republican opposition.
At a Tuesday morning Capitol Hill press conference AFL-CIO president John Sweeney said:
“It would be impossible to overstate the trouble our economy is in. We are losing jobs at a rate of half a million a month, real wages have been stagnant for far too long, and our housing and financial markets are in crisis….We cannot afford to let ideological differences kill or gut this economic recovery package. There is too much at stake.”
President Obama spent part of Tuesday meeting separately with Republican House and Senate leaders seeking bipartisan support for the measure. He was accompanied by economic adviser Larry Summers. Republicans while impressed with the president’s communication skills, showed little warmth for the measure, calling for more tax cuts for rich.
The bill has $550 billion in new spending and some $275 billion in tax cuts. A significant part of the tax cuts are aimed at working-class families. Other spending includes, food stamps, highway projects, aid to state governments hit by revenue loss and schools. According to reports, one-sixth of the almost $1 trillion package is dedicated school spending. House Democrats are said to have trimmed the tax cut proposal from the 40 percent originally proposed by the president’s team to 20 percent.
Some lawmakers while supportive of the legislation caution that it is not nearly enough to deal with the scale of the crisis, pointing to the lack of substantial enough infrastructure spending. The Washington Post reports that HR 1 “includes $30 billion for roads and bridges, $9 billion for public transit and $1 billion for inter-city rail — less than 5 percent of the package’s total spending.” Newspaper reports contend that some in the president’s economic team, including Mr. Summers, are skeptical of more infrastructure spending because it is not “shovel ready.”
Administration officials argue the bill should be seen as just the first step, suggesting more will be done later.
Today’s House vote coincides with the opening of the World Economic Forum in Davos, Switzerland amid deep gloom about the world economy. There, much hope is pinned on a US recovery. However, in the opinion of some, the scope of the crisis makes it beyond easy remedy. George Soros, for example, remarked to Bloomgburg.com that “You have to realize the size of the problem confronting us today is significantly larger than in the ‘30s.” Toxic assets in the form of foreclosed loans are now held by banks and other institutions all over the world, freezing credit markets bringing lending to a complete halt and rippling throughout other areas of the economy.
“It’s “delusional” to expect the U.S. fiscal stimulus plan crafted by President Barack Obama to “jump start” the economy, Stephen Roach, Morgan Stanley Asia’s chairman, told a panel in Davos today, reports Bloomberg.com.
The Federal Reserve also meets Wednesday and is due to report in the early afternoon on new measures to grapple with the economic crisis with it’s main instruments, manipulating interest rates, now exhausted.