House Passes American Recovery And Reinvestment Plan

by Mike Godfrey, Tax-News.com, Washington

30 January 2009

President Obama's economic recovery plan took another step closer to fruition on Wednesday after the United States House of Representatives voted to support a tax cut and spending package totaling USD819bn.

According to Rep. Charles Rangel, head of the Ways and Means Committee, which has jurisdiction over tax legislation, the bill offers "tremendous relief" to millions of working families and the unemployed, while also providing incentives for business to invest and create jobs. However, despite Obama's efforts to build bipartisan support for the proposals and the general consensus that something needs to be done to lift the US economy out of the mire, the bill passed with a less-than-resounding majority, with 244 voting in favour (all Democrats) and 188 voting against (all Republicans and about a dozen Democrats).

Welcoming the vote, Obama said that the recovery plan would "save or create more than three million new jobs over the next few years." But the rookie President clearly has some way to go to convince those on the right of the aisle that this course of action, which threatens to inflate the federal deficit to levels not seen since World War Two, is in the interests of the economy, either in the short- and long-term.

Ways and Means Ranking Member Dave Camp summed up the Republican mood, dismissing the stimulus bill in its current state as "nothing more than an over inflated spending bill that will have a bigger impact on the deficit than on job creation."

"What the Speaker has presented to the American people is a laundry list of wasteful spending coupled with disregard for the immediate relief American families and employers need, which tax cuts can provide," he added.

According to Camp, the true cost of the bill is well over USD1 trillion due to interest payments that would have to be made on top of USD800 billion in borrowed money.

Attention now turns the Senate, which is expected to pass its version of the recovery legislation, costed at more than USD900bn, by the end of this week.

Obama has said he wants a final compromise version by February 13.

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