American Recovery and Reinvestment Bill – $2,927 Per United States Citizen

The House and Senate continue to discuss the fate of a proposed economic stimulus package – the American Recovery and Reinvestment Bill of 2009.  Currently, the House version of the bill includes $825 Billion dollars worth of new spending and tax cuts.  The Senate version, as of yesterday, now has a price tag of $887 Billion dollars.

I’m trying to wrap my head around just how much $887 Billion dollars really is, and I’m not alone.  My pal Frugal Dad ran the numbers, and I strongly urge you to read his article about how long it would take to spend $887 Billion dollars, at a rate of $1 Million dollars per day.  Before you read his article, please be seated, because you might faint.

After reading Frugal Dad’s article, I grabbed my handy calculator, did a few Google searches, and I’ve come up with some pretty staggering numbers of my own.

According to the most recent estimates, there are 303 Million United States Citizens.  If the Senate version of the bill passes, the one that calls for $887 Billion dollars in new spending and tax cuts, that would equal $2,927 per United States Citizen.  This amount is in addition to all existing tax liabilities.

It looks like the bill, in some shape or form, is going to pass both houses of Congress and then be signed into law by President Obama.  Personally, my brain almost went numb as I read through this press release from the House Appropriations Committee.  I will not overwhelm you with details, but I strongly urge you to read the press release, which needed 13 pages just to summarize all of the new spending.

I would love to read your comments.  Are we moving in the right direction?  Do we have a choice?  Are there better alternatives?


NCN

http://www.ncnblog.com

No Credit Needed is a personal finance blog about debt reduction, saving money, and simple living. Thank you for visiting the site and please consider subscribing to No Credit Needed by Email. Have a blessed day!

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16 thoughts on “American Recovery and Reinvestment Bill – $2,927 Per United States Citizen
  1. Scott

    Some people estimate the total cost to the United States of the economic crisis so far at $.7.7 Trillion (not including the latest $880 billion stimulus). This includes all the money spent late last year, the loans, the bailouts, plus all the debts the U.S. government is now guaranteeing. Fanie Mae, Freddie Mac, AIG, everything.

    Plus there are only 138 mllion taxpayers in the United States. There are 303 million citizens, but more than half of them are too old or too young or too poor to pay taxes.

    Divide the $7.7 trillion into the 138 million people who owe it, and the cost of the crisis is $55,800 per taxpayer. So far.

    We take Visa, Mastercard, and Certified Check.

    I did the full math late last year here:
    http://www.mydemos.com/blog/PermaLink,guid,8cc6d3fe-d880-48c7-a9df-bf99eb63b091.aspx

     
  2. Chris

    From everything I’ve seen on this blog and and others, I’ve learned that you can’t get out of debt by spending more money and getting into more debt. How is this any different? This bill is loaded with more pork than a pig farm. Our children and grandchildren (and probably their grandchildren) will be born in massive debt. I don’t think this stimulus would stimulate anything. Look at what the money is being spent on! Are we any better off after that original $750B from last year? Now we just own some failing banks…

     
  3. Kevin

    @chris

    Yes, it is true that *you* (or any individual) cannot get out of debt by getting into more debt. But a national economy is not the same as an individual. That is how this is different.

    (And even then, your statement is a little too broad. One can get out of debt by going into more debt, if that additional debt is used to finance something that could generate cash flow, like a business, or more education.)

    Your children may be born into massive debt, but to say that their children and their grandchildren will be is a lot of hyperbole. The point of recovery is to save the economy so that a future robust economy will allow us to get out of debt. We did it in the 1990s when a booming economy allowed the congress to balance the budget.

    We could let the economy fail– and then we would be in debt for years and years to come. Or we could try to save the economy and rescue our future.

    And if you think it’s loaded with pork, what would you cut out?

     
  4. Kenny Johnson

    While I’m against personal debt (at least my own), I’m not against government debt, nor do I think it’s necessarily a bad thing for the US government to be in debt. We were in far more debt (in ratio to our GDP) after WWII than we are now, and we had great economic growth during those times.

    Some economist even believe that the deficit spending during the great depression helped the economy recover — and the deficit spending during WWII is almost universally accepted as the reason for ending The Great Depression.

     
  5. Pat

    Rather than do the calulation on 303 million people, do it on the number of taxpayers and see what that would be in a very nice tax rebate. By the way, don’t include big business in the calculation of taxpayers. Just individuals.

     
  6. Ellis Benus

    Absolutely not.

    Our government is already operating at a 10.6 Trillion
    (http://www.brillig.com/debt_clock/) dollar deficit.

    Now they want to give away almost another Trillion dollar (800+ billion)?

    No!

    The $2,500 each of us will get is not going to assist with much,
    whereas it is going to fundamentally harm the government
    and economy almost indefinitely.

    If we want to become Socialists, then yes, we are headed in the right direction.
    As a Democracy, we absolutely are not.

     
  7. Gunpowder Chronicle

    It’s fine to say $825 billion, but you are forgetting the other $300 billion in interest that absolutely must be calculated into this. Also, given that — in its current shape — less than 25% of that so-called stimulus will actually be spent in the next 8-10 months, it’s actual “stimulus” effects are highly questionable.

    What does $401 million in sod replenishment on the National Mall have to do with economic stimulus? Or $356 million to Planned Parenthood? Or $87 billion for STD testing? Or money for purchasing “alternative energy vehicles” for the DoD?

    It’s not a stimulus, it’s a giveaway. And it just won’t work.

     
  8. Rick

    Government debt is rarely justified. Take for example the stimulus checks last year. All it did was put us in more debt. Here in Utah the legislature is dealing with a tax shortfall by cutting spending. The Federal government needs to do the same. What most people don’t understand is that the more the government goes into debt, the more people will consciously or subconsciously save their money for even worse shocks to the economy later. Debt is worse than the plague for individuals and government. It is sad to see so many that have not yet learned this simple lesson.

     
  9. Peter

    This stimulus is a bad idea. It is filled with pork, and the actual cost is going to be well over a trillion dollars by the time its done. The only thing its going to mean is more government controls, less private sector control, and we’re headed down a slippery slope towards socialism. Hang on, it’s going to be a bumpy ride!

     
  10. Josh Wilson`

    The idea of “No Credit Needed” applies to government even more so than individuals. Government spending is controlled by less than a thousand people, but their decisions affect 300+ million of the rest of us – and it’s not even their money to spend (it’s our money, and they’re supposed to be managing it).

    There is no reason for government to go into debt. Ever. Just like a credit card, the consequences are hidden until they become crushing.

     
  11. Robert

    @Kevin: Unfortunately, you are mistaken. If you check the historical data provided by the Bureau of Public Debt (the branch of the treasury that tracks every debt owed by the federal Government) you’ll find that the last time the Federal debt decreased was 1957. Since 1957 the Federal Debt has increased every single year, even all 8 years that president Clinton was in office. His claim that he had a surplus was the result of accounting tricks that would make Enron proud.

    I cannot see any way that we as a nation can realistically expect to borrow our way to prosperity. All we do is continue to push off our financial problems for a few more years and set ourselves up for far worse when those debts need to be paid. Inevitably the debt grows faster than our economy until we reach a point that investors lose confidence and are no longer willing to loan the government additional funds. After all, the only thing backing our debts is the as-yet untested belief that the government would never default!

    Don’t forget, our GDP growth is usually around 2 to 3% per year while we are paying over 4% just in interest (or more accurately borrowing that money from new investors to repay the interest to older investors, like a Federal Ponzi scheme). Unless we somehow get GDP growth that is higher than the interest and deficit, we are only falling further behind no matter how “good” the economy appears to be.

     
  12. Jim

    First, the bailout was set around $850 billion- $150 billion in pork(thanks, republicans).
    Now, $3,000 per person isn’t going to do any good in tax cuts and rebates. I wouldn’t trust the average american with an extra $100 to tell the truth- seeing how badly most americans manage their money. This isn’t money we have- they already spent your tax dollars- this is money we’re printing to help the economy. Of course nobody likes to pay taxes from their “hard earned” money, but 35% is the highest tax rate in the U.S.? Please, if I was making million a year even, you can take 60%. I’ll make due. It’s obvious that some people get paid more than their fair share(who decides that Wall Street CEO’s get a total of $18 billion in bonuses in one of their worst performing years ever?) http://www.worldproutassembly.org/archives/2007/02/fed_chief_issue.html

    As far as the spending, sure some of it isn’t necessary.If you read the summary you’d realize there’s a lot of decent energy and science-type projects. The money toward mass transit is much needed, our public transit is far behind Europe’s and Japan’s. But all that money for college financial aid and work study needs to be spent- it really should increase about the same percent as the increase in tuition yearly. Oh but I think financial aid should be contingent on good grades- at least 3.0 or higher after the first semester. Anyone can coast through college with a 2.0, but what’s the point of that?

    Last thing, remember a lot of this won’t be spent immediately, and a lot of these are projects to improve America long-term, its not just a huge desperate money spike.

     
  13. kitty

    @Kevin: “And if you think it’s loaded with pork, what would you cut out?”
    Well, for one I don’t see how refundable tax credits is nothing more than wealth redistribution. It gives a little bit of money to those earning under 75K – none of these people create jobs; many of them don’t pay any taxes. Some of them will use it to repay debts, some will save, and some will spend it at Wall-mart for a Chinese made electronic gadget. This has already been tried in summer with the last stimulus check and it failed to do anything for the economy other then slightly better Target’s earnings for one quarter.

    I’ll ask a different question. Which portions of this bill actually stimulate the economy and lead to job creation? Infrastructure spending? How soon will this spending have any effect on economy? A few energy and science projects – yes, this is about the only thing about this bill that I like (agreed with Jim here).

    @Jim – “First, the bailout was set around $850 billion- $150 billion in pork(thanks, republicans).”
    Why republicans? The bill was drafted by the democrats with no input from republicans whatsoever. Republicans wanted tax cuts for small businesses that could actually lead to job creation. None of their ideas got into the bill. The refundable tax credit idea for those earning under 75K similar to what we had in summer is a completely democratic idea. There are very little tax cuts for businesses – not nearly enough to actually help with job creation. I do actually agree with you on many aspects of the bill – science and technology spending or mass transit, but other things while worthwhile do nothing to actually provide much needed help to economy now or create jobs (or at least stop massive layoffs).
    As to taxing the rich – I don’t care if Donald Trump pays higher taxes. I can even afford to pay a little bit more myself – as long as I am employed. I do care a lot if my employer -one of those rich Fortune 500 company pays higher taxes. Higher taxes = higher operating expenses = lower earnings = layoffs. Our high corporate business tax is contributing to much lower cost of moving business abroad. Which is what has been happening for the past 10 years. BTW – I am not republican, I actually voted against Bush twice, but as I have a habit of reading my employer’s earning reports (with fear), I do know how taxing businesses affects my paycheck and employment.

    I do realize the need for stimulus. But it has to actually help the economy and job creation. When more people are employed, more people pay taxes and that reduces debt. When people are losing their jobs, when businesses close, there isn’t much revenue coming in.

    One thing about government debt. Reading some of the posts above that compare government debt with individual debt leads me to question if many posters above understand how the government debt works. For those who don’t: government debt is bonds, treasury bills, TIPs, that we can buy ourselves i.e. when we buy government bonds we are lending money to the government. In the past it wasn’t bad because most of the debt was owned by Americans: i.e. the government borrows from us and our taxes pay for the interest, but the interest is paid back to us. But now most of the debt is owned by foreigners, especially Chinese. Which means that in future they can dictate our policies or control the interest on this bonds.

    Right now investors are so scared that they are willing to buy supposedly safe US government debt for an inflated price and with near-0% yield (for short term) or 2.5% yield for long term bonds. (Really, if I were the government I’d issue as many low interest bonds as possible and use the extra money to buy back older higher interest bonds i.e. use low interest loan to repay a high interest one. I think Bernacke hinted that he is buying back some of older bonds, if it’s true it would be nice).

    But Chinese and others start questioning if US treasuries are worth their current inflated price. IIf they lose appetite for the US debt, they may not want to buy our bonds or start selling what they have. When there are more sellers than buyers, bonds lose their value. This will lead to higher rates the US will need to pay on new bonds. Sure, it’s nice that the US has to pay its debt in its own currency, if need be it can just print more money. But this will lead to inflation and even higher rates. At any rate, having foreigners have that much control over our policies isn’t safe.

    But… I do believe that some kind of stimulus is needed to revive the economy, create jobs and consequently increase number of people who pay taxes. I just don’t see enough in this bill to do the job and I see a lot of pork. Granted some of this “pork” are useful things (in the long run), but the measures that are needed now are those that will actually help the economy.