How the stimulus bill affects you - PART 1

The $787 billion package might cut your taxes, make your health insurance cheaper, fix the roads you drive on and keep the best teachers in your children's schools. And that's just for starters.

[Related content: Barack Obama, economy, education, energy, recession]

By The Associated Press

Here's an examination of how the economic stimulus plan will affect Americans.

Taxes

The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the one they own more energy efficient.

Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year.

A $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded earned income tax credit.

Middle-income and wealthy taxpayers will be spared from paying the alternative minimum tax, which was designed 40 years ago to make sure wealthy taxpayers paid at least some tax but was never indexed for inflation. Congress fixes it each year, usually in the fall.

• Talk back: How will you use your tax refund?

First-time homebuyers who purchase their homes before Dec. 1 will be eligible for an $8,000 tax credit, and people who buy new cars before the end of the year can write off the sales taxes.

Homeowners who add energy-efficient windows, furnaces and air conditioners can get a tax credit to cover 30% of the costs, up to a total of $1,500. College students -- or their parents -- are eligible for tax credits of up to $2,500 to help pay tuition and related expenses in 2009 and 2010.

Those receiving unemployment benefits this year won't owe federal income taxes on the first $2,400 they receive.

Health insurance

Many workers who lose their health insurance when they lose their jobs will find it cheaper to keep that coverage while they look for work.

Right now, most people who work for medium or large employers can continue their coverage for 18 months under the COBRA program (named for the Consolidated Omnibus Budget Reconciliation Act) when they lose their jobs. The coverage is expensive, often more than $1,000 a month, because the newly unemployed pay the share of premiums once covered by their employer as well as their own share from the old group plan.

Under the stimulus package, the government will pick up 65% of the total cost of that premium for the first nine months.

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Lawmakers initially proposed also helping workers from small companies who don't generally qualify for COBRA coverage. But that fell through. The idea was to have Washington pay to extend Medicaid to that group.

COBRA applies to group plans at companies employing at least 20 people. The subsidies will be offered to those who lost their jobs from Sept. 1, 2008, to the end of 2009.

Those who were put out of work after September but didn't elect to have COBRA coverage at the time will have 60 days to sign up.

The plan also offers $87 billion to help states administer Medicaid. That could slow or reverse some of the steps states have taken to cut the program.

Infrastructure

Highways repaved for the first time in decades. Century-old waterlines dug up and replaced with new pipes. Aging bridges, stressed under the weight of today's SUVs, reinforced with fresh steel and concrete.

But the $90 billion is a mere down payment on what's needed to repair and improve the country's physical backbone. And not all economists agree it's an effective way to add jobs in the long term, or to stimulate the economy.

Energy

Homeowners looking to save energy, makers of solar panels and wind turbines, and companies hoping to bring the electric grid into the computer age all stand to reap major benefits.

The package contains more than $42 billion in energy-related investments, from tax credits for homeowners to loan guarantees for renewable energy projects and direct government grants for makers of wind turbines and next-generation batteries.

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There's a 30% tax credit of up to $1,500 for the purchase of high-efficiency residential air conditioners, heat pumps and furnaces. The credit also can be used by homeowners to replace drafty windows or put more insulation into the attic. About $300 million would go for rebates to get people to buy more efficient appliances.

The package includes $20 billion aimed at "green" jobs to make wind turbines and solar panels and to improve energy efficiency in schools and federal buildings. It includes $6 billion in loan guarantees for renewable energy projects, as well as tax breaks and direct grants covering 30% of wind and solar energy investments. An additional $5 billion is marked to help low-income homeowners make energy improvements.

About $11 billion goes to modernizing and expanding the nation's electric power grid and $2 billion to spur research into batteries for future electric cars.

Schools

A main goal of education spending in the stimulus bill is to help keep teachers on the job.

Nearly 600,000 jobs in elementary and secondary schools could be eliminated by state budget cuts over the next three years, according to a study released last week by the University of Washington. Fewer teachers mean bigger classes, something that districts are scrambling to prevent.

The stimulus sets up a $54 billion fund to help prevent or restore state budget cuts, of which $39 billion must go toward kindergarten through 12th grade and higher education. In addition, about $8 billion of the fund could be used for other priorities, including modernization and renovation of schools and colleges, though how much is unclear, because Congress decided not to specify a dollar figure.

The Education Department will distribute the money as quickly as it can over the next couple of years.

And it adds $25 billion extra to No Child Left Behind and special education programs, which help pay teacher salaries, among other things.

This money may go out much more slowly; states have five years to spend the dollars, and they have a history of spending them slowly. In fact, states don't spend all the money; they return nearly $100 million to the federal treasury every year.

The stimulus bill also includes more than $4 billion for Head Start early education programs and for child care programs.

National debt

One thing about the president's $790 billion stimulus package is certain: It will jack up the federal debt.

Whether or not it succeeds in producing jobs and taming the recession, tomorrow's taxpayers will end up footing the bill.

Forecasters expect the 2009 deficit -- for the budget year that began Oct. 1, 2008 -- to hit $1.6 trillion, including new stimulus and bank-bailout spending. That's about three times last year's shortfall.

The torrents of red ink are being fed by rising federal spending and falling tax revenues from hard-hit businesses and individuals.

The national debt -- the sum of money owed by all levels of government -- stands at $10.7 trillion, or about $36,000 for every man, woman and child in the U.S.

Interest payments alone on the national debt will near $500 billion this year. It's already the fourth-largest federal expenditure, after Medicare-Medicaid, Social Security and defense.

This will affect us all directly for years, as well as our children and possibly grandchildren, in higher taxes and probably reduced government services. It will also force continued government borrowing, increasingly from China, Japan, Britain, Saudi Arabia and other creditors.