More Jobs Or Reduced Fiscal Deficit- How Will The $200 Billion Saved Under TARP Be Used

President Obama has come up with a new proposal to provide stimulus to the economy and create jobs for the economy. Basically an extension of existing stimulus program the new plan would be financed by the $200 billion which was saved in the TARP. Below is a broad outline of what Mr Obama plans to do.

Small Business:

There are plenty of proposed sops for small businesses. The final blueprint is not yet ready but overall Obama plans to suspend for one year capital gains taxes on new investments for the stock of small businesses which is more or less an extension of the current Recovery Act tax break. The tax breaks would also be extended in 2010 to certain capital investments in small business upto a limit of $250,000. Tax breaks would also be provided to small businesses for recruiting new employees. There would also be waiver of fees for loans made to small business through the Small Business Administration.

Business:

Fewer taxes on capital expenditure would be extended for 2010 also for all businesses.

Infrastructure:

Approximately $50 billion would be spent for work on infrastructure projects that includes roads, bridges, airports and ports.

Energy:

Another area where Mr Obama is willing to spend money. There is a proposal to provide rebates and incentives to consumers who are willing to refurnish their homes with more energy efficient products. There is also plan to have another stimulus program that will provide easy credit to private companies that produce machines that reduce green house emissions like wind turbines.

Insurance and safety net:

Obama is also lobbying to increase unemployment benefits and provide assistance to the unemployed .He is proposing $250 grant to senior citizens and war veterans and providing incentives to states to reduce job cuts of teachers, police officers and fire fighters.

Though the ambitious plan is being discussed there are debates abound regarding the $200 billion savings figure and also whether this amount can be used for the new plan. Many top white house officials have raised doubt on whether they can use this money kept for TARP for infrastructure projects. Also experts say that this $200 billion number is only an estimate not the actual dollar available on hand. Instead the $73 billion returned by banks is hard cash which can be used on new stimulus programmes.

Also there are talks about how this freed money should be used. A section of politicians feel that this money should be used to finance infrastructure projects which in turn would create jobs. Another section feel that this money should be used to pay atleast a part of the huge fiscal deficit. In fact they argue that at the time of formulation of TARP it was agreed that any savings would be used to bring down the deficit.

President Obama however like always is doing a balancing act. He feels that reducing debt and creating more jobs are both in their own way important and both can be done simultaneously and he plans to use $200 billion saved under TARP to meet both these goals .