Q&A: Economic Stimulus Bill

What is the economic stimulus bill?

Barack Obama's bill proposes the biggest US spending splurge since the 1930s New Deal. The aim is the same: to get the US - and by default the rest of the world - out of the economic depression as fast as possible.

Obama is proposing to spend more than $800bn. A big proportion of this is for massive projects to help create or save jobs. Projects include billions on bridges, roads, waterworks and sewage disposal. Another area of big expenditure is on education, which Obama argues is necessary to make the US competitive.

To placate Republicans, a high proportion of the bill is made up of tax cuts. The aim is to get at least 60% of the $800 billion-plus into the economy within the next two years. The nonpartisan Congressional Budget Office estimated the bill would create between 1.3m and 3.9m jobs by the end of next year. US unemployment is at present 7.6%, about 11m.

What happens next to the stimulus bill?

The Senate voted today and the House having voted on January 28. The problem is that there are now two stimulus bills: the House version and the Senate version and the two sides now enter into days of negotiation to find consensus. Obama is hoping that the bill will have passed both the House and the Senate in time for him to sign it next Monday.

The House bill totals $819bn and the Senate $838bn, and there is consensus on about 80-90% of the proposals. Both bills would spend $47bn to help with unemployment benefit, increase spending on food stamps and raise and extend tax credits.

But the areas of difference represent a gaping ideological divide, mainly over education, health and energy. Republicans in the Senate have stripped out a lot of the education provisions, and Obama and the Democrats want them restored. The House bill proposes $79bn be given to states to spend on higher education but the Senate has chopped this back to $39bn. The Senate also eliminated $19bn for school construction.

The Senate version reduces the amount of tax breaks for the working-class. The Senate version also sets aside about $40bn for renewable energy projects and fuel-efficiency, whereas the House bill proposes $28bn.

Why are the Republicans refusing to back it?

Not a single Republican in the House voted for the bill and only three in the Senate. Republicans argue that there is not enough stimulus in the bill and that the amount of spending involved will mean that future generations will be saddled with debt.

"We borrowed $800bn dollars between the revolutionary war and the presidency of Jimmy Carter and we are going to borrow that amount in one fell swoop," said Senator John Thune of South Dakota.

The Republicans also have partisan motives. The country is divided over whether the stimulus will work and the Republicans want to be in a position of saying they opposed it, and that could be helpful in next year's Congressional elections.

If the stimulus package does not work, Obama and the Democrats are prepared to bring forward new spending bills.