Bailout. Stimulus. You may have had enough of those words, but you are sure to hear them again and again in the coming weeks and months since the economy is issue No. 1 here.
First, the bailout, intended to stabilise financial institutions and ease credit. We now learn that the $700-billion Troubled Assets Relief Programme, as it is officially known, may need more money.
The Senate approved the release of the second half of funding just before President Barack Obama assumed office. The new administration has assured lawmakers it will spend the money prudently. But with many big banks bleeding and demands to help homeowners avoid foreclosure, the cost is expected to rise. The tab could exceed $1 trillion, the Washington Post said.
The stimulus plan, aimed at jolting the economy out of a deep recession, has not been finalised yet. On Saturday, Obama used his first weekly radio address since becoming president to build public support for what is now an $825-billion package.
"I know that some are skeptical about the size and scale of this recovery plan," he said. “We won't just throw money at our problems — we'll invest in what works. Instead of politicians doling out money behind a veil of secrecy, decisions about where we invest will be made public, and informed by independent experts whenever possible.”
The plan, which includes tax cuts, will invest in priorities like energy, education, health care and infrastructure. It is expected to create or save 4 million jobs.
Among other things, it proposes to:
- Double renewable energy to power six million homes
- Update the electrical grid by laying more than 3,000 miles of transmission lines
- Repair and modernise thousands of miles of roadways
- Renovate 10,000 schools and triple science fellowships
- Protect health insurance for 8.5 million people who lose jobs
- Computerise all Americans’ health records within five years
- Secure 90 major ports
Peter Morici, a professor at the University of Maryland's Robert H. Smith School of Business, is sceptical about the plan. "We will see some benefits, but I am not sure how long they will last," he told HT. "Once the money is spent, we will slip back into a depression -- because of our trade deficit with China, dependence on foreign oil and failure to fix the banks.”
While some Democrats in Congress think the plan is not large enough, Republican opponents say it relies too heavily on spending. On Sunday, Vice President Joe Biden and Obama's chief economic adviser, Lawrence Summers, hit the talk-show circuit to plug the package. Obama plans to meet Republican leaders on Tuesday.
One thing seems certain. As Summers said on NBC's Meet the Press, “these problems weren't made in a day or a week or a month or even a year, and they're not going to get solved that fast.”