On Thursday night President Obama outlined his new stimulus package (if it walks like a duck and talks like a duck, then it is in all reality a duck), which is meant to lower national unemployment and help grow the economy. The American Recovery and Reinvestment Act (ARRA) was the first “Stimulus Package” and came-in with an original price tag of $787 billion, while last week’s version is predicted to total $447 billion. As of late, ARRA has been criticized by Republicans and Democrats alike. The national unemployment rate has been stuck at around 9% since the beginning of the year, while the underemployment rate has been hovering around 16%. In addition, the President’s approval rating is at or near an all time low since he has taken office. Bottom line, the latest stimulus package is going to be a very tough sell to Congress.
Components of the Package
The four main components of the package unveiled last week include the following:
1) Employee Payroll Tax cut from 6.2% to 3.1% in 2012
2) Employer Payroll Tax cut from 6.2% to 3.1% in 2012
3) Extending Unemployment Insurance
4) Infrastructure Spending & Aid to the States
The estimated total cost of the new program is $447 billion, and it is predicted to bring down the national unemployment rate from the current 9.1% to 8.1% by the end of 2012. Make no mistake; the Democrats want to keep control of the White House for four more years, and with the Presidential Election scheduled for November 6, 2012, it stands to reason that this package will bolster their chances.
The Real Deal
The Senate has a Democratic majority and the House a Republican majority. As a result, the chances of all four components being pass are slim to none. However, the employee and employer payroll tax cuts look like two components that could be passed by the House and Senate, and land on Obama’s desk for signing. There is also a fair chance that the unemployment component could be passed if the environment allows it. However, the infrastructure spending & state aid portion should be packaged a solitary item because it could be a deal killer if attached to payroll tax cuts or unemployment insurance legislation.
Here is the caveat, if Republicans and Democrats agree on employee and employer payroll tax cuts, combined with extended unemployment components, then there is a fair shot that unemployment could be brought down to approximately 8%. This possible outcome would show a bi-partisan effort and be good for America. However, if unemployment were brought down to this level, then President Obama would most likely remain in the White House for another term. The time leading up to the 2012 Presidential Election is becoming shorter by the day and we shall soon see what direction the Republicans are going to take regarding the latest stimulus package. They do not want to be painted as obstructionists, but they do want to have either Mitt Romney or Rick Perry in the White House. In any event, it will be an interesting time leading up to November 6, 2012.