Obama signs US stimulus bill
Markets fall despite US president hailing plan as move towards “real and lasting” change.
Markets fall
Obama had previously warned of economic “disaster” if US congress, which passed the bill last week, did not act swiftly on the crisis.
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Al Jazeera’s John Terrett said most economists felt it was better to have a stimulus package rather than not, but concern remains about whether it will work as the global economy continues to slump.
US stocks also fell after Obama signed the bill into law amid continued economic concerns, with the Dow Jones Industrial Average closing down 297.81 points, or 3.79 per cent, to 7,552.60 points.
Investors in Asia also appeared less than assured by the US stimulus bill, with markets across the region trading lower on Wednesday.
Japan’s benchmark Nikkei stock average touched a three-month intraday low of 7,479.18 points before recovering slightly to close the morning session 1.2 per cent lower at 7,554.65.
Bankruptcy risk
The Obama administration also hopes the stimulus package will prop up the country’s financial system, ease the burden of many Americans facing mortgage foreclosures and save the country’s car-making industry.
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Plan is worth $787bn“I don’t want to pretend that today marks the end of our economic problems nor does it constitute all of what we have to do to turn the economy around,” Obama said, warning there would be “hazards and reverses”.
“But today does mark the beginning of the end – the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs.”
Democrats and Republicans spent days battling over the plan in both the US House of Representatives and the senate, as Republicans complained that the initial size of the bill was too large and did not incorporate enough tax cuts.
Obama had earlier toured a solar panel installation project in Denver in a bid to show how billions of dollars of the stimulus package, earmarked for alternative energy, could be used for new “green jobs” which in turn would boost the US economy.
The bill’s passage into law comes as US car manufacturers General Motors (GM) and Chrysler, kept afloat on a combined $13.4bn in federal emergency loans, were expected to report their plans for reorganising for long-term survival.
Shares in GM fell more than 11 per cent on Tuesday and analysts said the recent showdown between GM, its bond holders and the United Auto Workers union underscored the heightened risk of bankruptcy for the US car-maker.
Tax incentives
Roughly one-third of the stimulus funds will be spent on tax cuts, totalling $286bn, in an effort to boost consumer spending, a vital engine of the world’s largest economy.
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The cuts include a one-off $400 tax break for most individual US workers and $800 for couples, including those who do not earn enough to pay income taxes.
A further $120bn is being allocated to infrastructure projects covering transportation, road building, improving the nation’s power grid and renewable energy installations.
Consumers will also receive tax incentives to buy first homes and new cars.
Poor people and workers who have lost their jobs will benefit from increased unemployment and food benefits and subsidies for health insurance.
The bill also includes a controversial “Buy American” provision that, despite being watered down, has angered US trading partners.
Despite the plan, financial analysts say the US economy will remain feeble throughout 2009. Some economists predict that the US budget deficit for 2009 will hit $1.6 trillion, including the stimulus spending – about three times last year’s shortfall.