The Stimulus Package on Metals Markets

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Friday, HR1, The American Recovery and Reinvestment Act cleared both houses and will now sail over to President Obama’s desk for certain signature. But major differences between the two political parties still exist. Republicans want more stimulative tax cuts whereas Democrats say, “that the only way out is a massive program of government spending, targeted to create jobs,” according to this Christian Science Monitor article.

Republicans claim that not all spending is stimulus and the spending Democrats propose will also tend to permanently expand the size of government and burden future generations with a massive federal debt.
The package includes $308.3 billion in new spending, $267 billion for social services, and $212 billion for tax breaks. According to the article, big ticket items on the tax side include: $116.2 billion for President Obama’s signature Make Work Pay refundable tax credit (up to $400 for individuals and $800 for married couples), $20 billion in tax incentives for clean energy which will help manufacturers and many segments of the metals industry, a $14 billion tax credit for higher education expenses, and $4.7 billion earned income tax credits for families with three or more children.

On the spending side, the biggest boon for the steel industry involves the spending of $48 billion on transportation infrastructure, including $27.5 billion for highways, bridges and road projects, and $8.4 billion for mass transit. The package contains $11 billion to modernize the nation’s electric grid which would also help some portions of the metals industry (see our earlier analysis of the bill) and $6 billion to fund alternative energy research.

But as we had discussed in our earlier analysis, though there are some aspects of the stimulus program that will at least slightly boost metals demand, much of the package will likely not do much to increase demand or spur business investment. Add to that a watered down Buy American clause that remained, and though this bill is likely better than doing nothing, it could have gone a whole lot farther to promote job creation and business activity. We will continue to cover the stimulus package and additional legislation sure to impact the manufacturing sector.

–Lisa Reisman

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