United States: A Rose By Any Other Name: A Second Economic Recovery Act May Be On The Way...But Don´t Call It A Stimulus

Jobs, Jobs, Jobs

The Obama administration continues to tout the performance of the "American Recovery and Reinvestment Act of 2009," signed into law February 17, 2009 and commonly called the "Stimulus Bill" (Public Law 111-5). One of the biggest, and most argued over, metrics is job creation. The Obama administration, on the website "Recovery.Gov," lists that as of October 10, 2009, 30,383 jobs were either created or saved by the stimulus funding sent to federal contractors via grants. In addition, the Obama administration announced in a report issued October 19, 2009 that 250,000 education jobs were either created or saved, thanks to $67 billion in stimulus formula grants distributed through September 30 ("Educational Impact of the American Recovery and Reinvestment Act"). These funds went to help state and local governments fill in gaps in education-spending as a result of declining tax revenue, thereby avoiding lay-off of teachers and other personnel.

The Obama administration argues that, but for the stimulus bill, these jobs would not exist and the recession would be far worse. Regardless, this has not stopped the unemployment rate from reaching 9.8 percent in September, the highest since June 1983. Labor Department statistics indicate 7.2 million jobs have been eliminated since the recession began in December 2007 ( www.dol.gov). Even President Obama has stated that the unemployment rate will reach and exceed 10 percent, a symbolic but important milestone, perhaps as soon as October's unemployment figures are reported.

All of this has led to calls for a second effort to help the nation's economy, with a particular effort to address high unemployment. But the Obama administration will not call it a second stimulus bill, in large part because of the concern that to do so would be to admit that the first stimulus bill was a failure. Semantics aside, the Public Policy & Infrastructure Group does not see the president and Congress agreeing to another stimulus package equaling the $787 billion included in the first one. Besides being seen by some as an admission of failure, the distribution of funds from the first stimulus bill has not even reached the halfway mark. Recovery.gov notes, for example, that of the $275 billion that is set aside under the stimulus for contracts, grants and loans, only $47 billon has been spent as of October 8, 2009.

We anticipate considerable funding opportunities to become available between now and September 30, 2010, as indicated under the stimulus bill. The remaining levels of appropriated monies, as well as a growing call for many types of additional funding, also suggests the possibility—uncertain at this point—that FY 2011 might be a time to create a broader spending vehicle. But legislation extending unemployment benefits, set to expire for many between now and December 31, has a very strong likelihood of enactment into law, and this could be a vehicle for other efforts to address the current economic situation, primarily in the form of tax credits and not in direct spending. Components of a second economic recovery act are discussed below.

Options on the Table for a Second Effort to Address the Nation's Economy

Extend unemployment insurance – Congress has already passed a number of extensions of the unemployment program, most recently in February, but many workers have either run out of or are about to run out of benefits. The House of Representatives passed a proposal to extend benefits 13 weeks for 25 states—the states that contain about 70 percent of the U.S. population—that have had an average jobless rate of at least 8.5 percent for three months. H.R. 3548, the "Unemployment Compensation Extension Act of 2009," passed the House of Representatives by a large majority, 331-83, in September and is pending in the Senate. Senate Democrats want to amend the bill to extend unemployment insurance by 14 weeks for everyone, and add six extra weeks for those states where unemployment rates are 8.5 percent or better. While final details have not yet been approved, we consider some extension of unemployment as likely to pass and be the legislative vehicle for which all other options that get approved are attached.

Extend tax credit for first-time homebuyers – The $8,000 tax credit for first-time homebuyers was included in the stimulus bill and is very popular. While the program expires November 30, many Republicans and Democrats support an extension, as do the nation's homebuilders. The program currently is capped to individuals earning $75,000 and families earning $150,000, but there is a proposal pending in the Senate to double those income limits in an extension that would last through June 30. In addition, the proposal would make the credit apply to anyone buying a primary home, not just first-time home buyers. Senators are discussing adding this proposal to the unemployment benefits bill and, given the popularity of the underlying program, we also consider this likely to pass, after debate and some potential changes.

Extend a tax credit for laid-off workers who buy health insurance through the COBRA program – Another idea supported by the Obama administration and many in Congress is to continue a tax credit that allows workers to keep their company's health insurance plan after they leave their job, with the government's help. The tax credit pays for two-thirds of the cost of premiums, with the employee paying the rest. That program is set to expire December 31, and many support extending it for another nine months. There is no proposal yet in the Senate to do so; however, we consider this another popular proposal that has a strong likelihood of passage.

$250 payment for Social Security beneficiaries – President Obama has proposed a one-time $250 payment to Social Security beneficiaries for 2010 as there will be no cost-of-living adjustment ("COLA") that year. COLAs are based on the rate of inflation, which declined during the period used to calculate the COLA. This is a politically popular proposal that also is likely to be enacted into law.

Tax credits and other assistance to businesses to promote job creation – There have been discussions in Congress as to how to further stimulate job creation. Some House Democrats support a tax credit to companies for every new job they create, tracking a similar proposal that was made by the Obama administration during the debate on the stimulus, but then rejected by Congress. Another proposal is to extend the net operating loss carryback provision for small businesses that was included in the stimulus bill. This provision allows small businesses to apply losses from prior years to offset past profits and claim tax refunds. Currently, this applies to businesses with gross receipts of $15 million or less. Neither proposal is currently under consideration in the Senate, where the unemployment bill is pending, so enactment into law may not be as likely as with the other proposals mentioned above.

Conclusion – It All Comes Down to Cost

What will determine the final dimensions of a package, besides the likely unemployment benefit extension, is cost. Given the latest projections on the federal deficit for 2009 hitting $1.42 trillion, the biggest deficit since World War II, Congress will struggle with any new spending amounts. A major factor will be the congressional requirement that any new spending be supported by either cuts in other areas or tax increases, so-called "pay-go" provisions. As a way to meet pay-go requirements, Republicans are proposing to offset the costs of a new economic recovery package with unused funds from the stimulus. Democrats and the Obama administration do not support this idea, but have not yet proposed their own offsets.

As the debate on an overall package continues, the Public Policy & Infrastructure Group will continue to provide updates as necessary. Clients should be advised, however, to anticipate an enormous level of grant funding during this fiscal year, with sensitivity toward maintaining the right to continue to use at least the remaining Stimulus Bill funds beyond the originally defined deadline. Important political and policy questions remain to be answered, but opportunities should also be available.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions