Stimulus Plan and Political Philosophies

The Senate voted 61-37 to pass a multi-billion dollar stimulus bill Tuesday, but the debate on the stimulus plan has just begun.

The Senate's plan is a combination of $838 billion worth of spending and tax cuts. That's bigger than the $819 billion bill that passed in the House.

It's hard to wrap your head around numbers like that, but that's what lawmakers will be doing in the weeks ahead in an effort to bring the country out of the worst recession in decades. The Senate's version of the bill made it through with Democratic support, and just three Republicans were behind it.

At the heart of the debate on Capital Hill is a fundamental difference in political philosophy. UVA professor Herman Schwartz says Democrats, including President Obama, support channeling money into government programs and projects, aimed at creating jobs.

"When you build schools or rebuild highways or when you improve the electricity grid, you're employing people who would otherwise be unemployed. They can go out to spend money that's new money because they now have job again," said Schwartz.

Schwartz explained that Republicans favor tax cuts as the answer, believing if the taxpayers keep more of their income, they'll buy more goods and services.

"The argument would be the basic problem with the economy is that the government is too big and, therefore, you want to put money into people's hands, and they will go out and spend that money and that will help stimulate the economy," said Schwartz.

Now comes the task of reconciling the House bill, which includes more spending, with the Senate's version, which has more tax cuts than the House's bill. Cordel Faulk with UVA Center for Politics says it may be weeks before a final bill is ready for the President.

"It's going to be interesting to see how the two are reconciled. The House plan is different from the Senate plan. The Senate plan had to be pared back to get those few Republican votes the Democrats needed to prevent a filibuster," says Faulk.

So where does the government get over $800 billion dollars, and how would the stimulus package help the economy?

Schwartz explains it this way: The administration goes to the Federal Reserve, and asks them to buy more than $800 billion worth of treasury funds. The Federal Reserve then gives the administration $800 billion in cash. That money winds up in the public's hands for them to buy goods and services. The value of the goods produced equals out to the investment.
source>>>

Read More