The agreement on the Obama Stimulus Plan makes Barack Obama the first president to ever have such a significant economic stimulus package passed by both Houses in such a short period of time. It is the biggest economic relief package since FDR’s “New Deal”. But what does it mean to the average American?

The almost $800 billion stimulus package means that lower and middle-income taxpayers will get an extra $13 a week in their paycheck this year and about $8 more a week next year. Unemployment checks will go up $25 a week and will keep coming even longer. There are thousands of dollars of tax breaks for new home buyers and people buying new cars. Food stamp benefits will rise for 30 million Americans and short-term health insurance will become more affordable for many losing their jobs.

Obama’s economic stimulus package breaks down to $280.8 billion in tax cuts, $308.5 billion in discretionary spending and $198 billion in Direct Spending. Here’s how that breaks down:

Tax Cuts

• $280.8 Billion

Discretionary Spending

• $61.1 billion in Transportation, Housing/Urban Development
• $53.6 billion in State and local school grants
• $50.8 billion in Energy and Water
• $43.9 billion in Education
• $26.4 billion in Agriculture
• $25.8 billion in Depts of Labor and Health and Human Services
• $10.5 billion in Environment
• $36.4 billion in Other spending

Direct Spending

• $90 billion in Medicaid
• $57.3 billion in unemployment, compensation and other programs
• $25.1 billion in Cobra subsidies
• $20.8 billion in Health information technology
• $4.8 billion in other spending

Many in Washington are heralding this stimulus package as a sure winner for America. But the ugly truth about the Obama stimulus plan is that the average American had to take it on the chin in order for the stimulus package to pass. The original plan called for a $15,000 tax credit to first time homebuyers - that was cut from plan. Buyers can still get up to $8,000 tax credit - but it’s really a tax-free loan to be paid back by the home buyer over 15 years. And any potential tax savings on reducting car loan interest from your income tax was also slashed from the stimulus package.

Pork barrel spending is also stuffed into this stimulus packages. Senate Majority Leader Harry Reid (D-Nevada) was able to allocate a big chunk of the $8 billion to construct high-speed rail lines could go to a Los Angeles to Las Vegas route. And Arlen Specter (R -Pennsylvania) make sure $10 billion was set aside for one of his priorities, the National Institutes of Health.

While the deal-making was going on, the Republicans fought for tax cuts while the Democrats wanted spending. You know who won - Nancy Pelosi and the Democrats.

So in a nutshell, the celebrated Obama stimulus package does little for the average American. You think that $13 more dollars a week is going to make a difference to the average American? This will help spread the gap between the haves and the have-nots in America.

This is NOT a stimulus package, instead, it’s a stability package to keep America from going into Depression - that’s right Depression!

Where are all the new jobs coming from? And what about the bill that our children will have to pay?

It’s typical politics - nothing has changed in Washington - and probably never will.

It appears that a compromise in the economic stimulus plan could be reached as early as Friday and signed into law by President Obama on Presidents Day. But the question is will the Obama economic stimulus plan do enough to get consumers spending or is it a short term solution to get us through the recession instead of getting us out of it?

“I think (doing) nothing would have been better,” said Ed Yardeni, an investment analyst who’s usually an optimist, in an interview with McClatchy Newspapers. He argued that the economic stimulus plan fails to provide the right incentives to spur spending.

“It’s unfocused. That is my problem. It is a lot of money for a lot of nickel-and-dime programs. I would have rather had a lot of money for (promoting purchase of) housing and autos. … Most of this plan is really, I think, aimed at stabilizing the situation and helping people get through the recession, rather than getting us out of the recession. They are actually providing less short-term stimulus by cutting back, from what I understand, some of the tax credits.”

The House and Senate negotiators have narrowed the differences between their economic stimulus plans. In doing so they scrapped a large tax credit for buying automobiles that would have caused positive ripple effects across the manufacturing sector. They settled instead on letting purchasers of new vehicles deduct from their federal taxes the state and local sales taxes on the cars they bought. Will this economic stimulus line item really incite people to spend?

The exception to this is for buyers of plug-in hybrids, cars that run off a battery that can be charged at home or in the office. Buyers of these vehicles, available in very limited supply, could get a tax credit of up to $9,100.

A Republican-backed proposal that would have provided a $15,000 tax credit to first-time homebuyers also was scaled back dramatically. Instead, the compromise provides first-time homebuyers a tax credit of up to $8,000, and it doesn’t have to be repaid over the life of the mortgage. Incentives already in place offer buyers a $7,500 credit that must be repaid, so the bill is an improvement, but short of what many economists think is necessary.

Another reason that some analysts frown on the stimulus is the social spending it includes on things such as the Head Start program for disadvantaged children and aid to NASA for climate-change research. Both may be worthy efforts, but they aren’t aimed at delivering short-term boosts to economic activity.

“All this is 25 years of government expansion jammed into one bill and sold as stimulus,” said Brian Riedl, the director of budget analysis for the Heritage Foundation, a conservative policy research group.

The exception to this is for buyers of plug-in hybrids, cars that run off a battery that can be charged at home or in the office. Buyers of these vehicles, available in very limited supply, could get a tax credit of up to $9,100.

A Republican-backed proposal that would have provided a $15,000 tax credit to first-time homebuyers also was scaled back dramatically. Instead, the compromise provides first-time homebuyers a tax credit of up to $8,000, and it doesn’t have to be repaid over the life of the mortgage. Incentives already in place offer buyers a $7,500 credit that must be repaid, so the bill is an improvement, but short of what many economists think is necessary.

Another reason that some analysts frown on the stimulus is the social spending it includes on things such as the Head Start program for disadvantaged children and aid to NASA for climate-change research. Both may be worthy efforts, but they aren’t aimed at delivering short-term boosts to economic activity.

“All this is 25 years of government expansion jammed into one bill and sold as stimulus,” said Brian Riedl, the director of budget analysis for the Heritage Foundation, a conservative policy research group.

Others shared a similarly dim view. In a brief on the stimulus compromise, William Galston, a senior fellow at the center-left Brookings Institution and a former Clinton White House adviser, warned Thursday that a bank-rescue plan being finalized will make the $789 billion look like “pocket change.”

“While the stimulus bill is a necessary condition for economic stabilization and recovery, it is hardly sufficient,” Galston wrote. “As the lesson of Japan in the 1990s shows, fiscal stimulus without financial rescue yields stagnation - at best.”

Galston further wrote: ” … Serious observers believe that recovery cannot begin until we acknowledge that losses in the financial system amount to some trillions of dollars, rendering many institutions insolvent. The temptation will be to muddle along, hoping that these institutions can gradually regain strength without putting massive amounts of taxpayers’ money at risk. If we go down that road, we are likely to end up with zombie banks whose balance sheets are riddled with near-worthless investments - banks that cannot lend to credit-worthy customers and who cannot trust one another.”

With the economy in a tailspin, doing nothing isn’t an option, however.

“Something is better than nothing, and bigger was better than smaller in terms of the stimulus needed,” said Chris Varvares, president of prominent forecaster Macroeconomic Advisers in St. Louis. “The economy needs a fiscal jolt.”

Even some proponents of a stimulus are disappointed, however. Harvard University economist Martin Feldstein, a former adviser to President Ronald Reagan, was an early supporter. He said that government is now the only engine left to spark economic activity, but he said that the compromise falls short of what’s needed.

“If the choice is between the current bill and an improved bill, I would say wait and improve the bill,” Feldstein told CNBC on Wednesday after the compromise was announced. “I am disappointed with the structure of this bill.”

At the end of the say, both the Senate and House will compromise on the obama economic stimulus plan becasue the government economic stimulus is the last car left in town to “jump-start” the economy - and Congress is the “cables”.

source: Kansas City Star

The Internal Revenue Service is getting reports that some tax preparers are telling customers that their stimulus checks are taxable.

But the IRS has clarified that the stimulus payments will not reduce your 2007 or 2008 refund, nor will they increase the amount you owe when you file your 2008 return.

The confusion apparently has surfaced with various income tax software packages.  It asks filers to report the amount of their check to determine if they are eligible for the new recovery rebate credit.  So if you use tax software, be certain to check that the program is not calculating tax on stimulus payments.

Taxpayers who did not receive a stimulus payment may be eligible for a recovery rebate credit.