The Obama Non-Stimulus Plan

HR 1 provides supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and local and fiscal stabilization. The bill is promoted as a stimulus package totaling $825 billion. Published reports describe the package’s expenditures to include $365.6 billion for infrastructure; $180 billion for jobless benefits, and $275 billion for tax relief.

The Democrats have recently begun describing this package as a recovery package versus a stimulus package. Based on our review, we find the recovery description much more in line with what is contained in the package. The package does not emphasize production improvements but rather a greater emphasis on short term consumption of social welfare benefits and implementation of energy conservation measures. The goal of economic growth is to increase overall output. This increase in output should be based on improvement in technological processes and improvement in quality and number of human resources. While the plan provides for job training, infrastructure development, and education, it places a greater emphasis on construction.

Approximately 12%, or $98 billion is targeted at technology, education, transportation, and job training. The remainder of the package is addressed to consumption. Given the multiplier effect and the lag time for funds to enter the system, we expect approximately $245 billion of stimulus to move through the economy by 2011. The current shortfall in Gross Domestic Product is $221 billion as of 3rd quarter 2008.

We expect a rise in the relative level of prices as the $825 billion stimulus package moves through the economy. After accounting for multiplier effects, the aggregate stimulus will total over $2 trillion.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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