More on the Stupendous Stimulus Spending Plan

The WSJ breaks down into a neat package some of the spending in the Stimulus Spending Plan. You can read about it here.

Right off I see $116,199,000,000 for tax credits: $400 payroll tax credit for workers earning up to $75,000; married couples filing jointly get $800 for income up to $150,000. If you qualify that comes out to about $15 a week for a married couple. Woohoo!

Then there's $90,044,000,000 in Medicaid spending. I guess that'll stimulate more people to work? Or is this, along with the $19,991,000,000 to bolster food stamps by 13%, preparation for those who are about to be out of work?

Perhaps the $7,500 to $8,000 tax credit for new home buyers will stimulate some who might be renting to make the leap to home ownership. I see this as benefiting a narrow band of individuals who might be on the fence about owning a home - for the first time. The tax credit - originally proposed to be around $15,000 - might be enough to get them to buy a house. The plan sets aside $6,638,000,000 which would provide funding for nearly 800,000 home purchases. There are hundreds of thousands of newly constructed homes just sitting from the end of the housing boom a few months ago.

And what will indirectly assist the auto industry? There's a provision to allow taxpayers earning less than $125,000 the ability to deduct sales and excise taxes paid on new cars. $1,684,000,000 is set aside for this. If you begin to think about the real savings for this, you'll quickly realize the savings is small. New cars aren't cheap and in my opinion are grossly overpriced compared to their value. At $40,000 new and with a 5% state sales tax, you'll pay $2,000 in sales tax. You can deduct that amount on your taxes and with a 25% marginal tax rate, you'll see $500 as a tax refund. It's not as nice as a tax credit now is it? I fear it's simply a matter of months before we see a complete collapse and restructuring of this industry. I think it's about time. The price on new cars is ridiculous and some companies can't make it charging that amount (GM, Chrysler, Ford, etc). I don't know if it's the cost of the labor, the cost of the materials, adherence to Government regulations that ultimately require more labor/parts/R&D, et cetera, but if a company can't make it they should fail. That's the way capitalism works - some other company will pick up the demand. GM announced yesterday the intent to sell off 3 of their auto lines if they didn't get additional assistance. Come on!?!?

The provision that raises some major concern for me has to do with the incentives provided to hospitals and physicians who computerize their medical records systems. The provision sets aside a massive $17,559,000,000 for this. The pundits on the news networks indicate this is a step toward socialized medicine. It could be, I suppose, if the incentives are tied to networking this information. That's what they say it does. I haven't read it myself. I guess that's my homework. I see the owners of some electronic medical records companies getting wealthy off this and I see no economic stimulus as a result. This one stinks.

I genuinely hope something positive comes of this spending. All I can taste right now is foul and bitter. What are your thoughts?