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As lawmakers grapple over the right economic stimulus, investors are wondering if the GOP’s alternative plan is a better idea or if it’s just political posturing?
Negotiations over the proposed stimulus are currently underway in Washington, however as things stand now, it appears Democrats lack the 60 votes needed in the Senate to overcome potential Republican delays.
And ontop of that President Obama wants healthy bipartisan support after the Democratic-controlled House of Representatives passed its own stimulus plan last week despite winning no Republican backing.
The House bill has met with growing criticism. "The American people are beginning to figure out what this package is, that it's not a stimulus package -- it's a spending package," said Sen. John McCain, an Arizona Republican who lost to Obama in the 2008 presidential election.
In response Senate Republicans offered their own, cheaper economic stimulus plans focused on tax cuts – it’s a plan priced at $445 billion, half the cost of Democratic version which totals $885 billion.
It centers on cutting in half a 6.2 percent payroll tax on employees, cutting the corporate tax rate to 25 percent from 35 percent and lowering the bottom two income tax brackets to 10 percent and 5 percent, all for one year.
The GOP also proposed $11 billion to help prevent home foreclosures. "Our focus is first on housing, low interest mortgages and a tax credit for home buyers," explains Sen. Lamar Alexander (R) Tennessee on Fast Money. "We want to give every American the opportunity to buy a 4% mortgage."
As you probably know the Democratic plan also involves tax cuts as well as spending on massive public works projects involving infrastructure, healthcare education and more – on the order of FDR’s “New Deal.”
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Our news partner, Reuters came up with some possible revisions that might help Democrats drum up enough votes to win final passage of their stimulus bill by both the House of Representatives and the Senate.
We thought you’d find it interesting.
* Easing if not eliminating proposed "buy American" restrictions requiring iron, steel and manufactured goods used in stimulus projects -- such as the construction of roads and bridges and schools -- be produced in the United States. Critics fear the restrictions could trigger a trade war.
* Trimming the price tag, which has tripled to more than $900 billion since early estimates just a few months ago. Lawmakers in both parties have called for reductions, with some Republicans suggesting it be cut back by as much as half, though cuts that deep are unlikely.
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* Devoting more of the package to tax cuts. Currently, less than a third would go to tax relief. Obama had initially proposed 40 percent, but figure was reduced as Democrats offered additional spending projects.
* Cutting spending on projects that critics say would provide little, if any, stimulative impact on the economy or jobs. They includes ones to provide $335 million to prevent sexually transmitted diseases, $25 million to rehabilitate trails for all-terrain vehicles and $524 million for a State Department program that critics say would create just 388 jobs in the U.S. -- at a price of $1.35 million per job.
* Increasing the effort to stem the record home mortgage foreclosures, which have been largely to blame for the economic downturn. Republicans suggest measures to push mortgage rates as low as 4 percent, arguing this could entice buyers into the moribund market and lower borrowing cost for existing homeowners.
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Trader disclosure: On Feb. 4th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (TM), (DIS), (MS), (SDS), (AAPL); Finerman's Firm Owns (DNA) & (DNA) Calls; Finerman's Firm Owns (MSFT), (PM); Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (BBT); Najarian Owns (BMY) Calls; Najarian Owns (CSCO) Call Spread; Najarian Owns (CAT) Call Spread; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (GDX) Call Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (V) Call Spread
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