Obama's $500 Billion Bailout Plan

President-elect Barack Obama announced a Economic Stimulus Plan that could run between $500-$700 billion over the next two years. The plan includes creation or retention of 2.5 million jobs through a $25 billion public works construction program, a $3,000 tax credit to businesses for each new hire, and $50 billion to auto companies for retooling to produce energy efficient vehicles.

What It Means to You

Many people are worried that the billions of dollars being pumped into the economy by government stimulus plans will lead to hyperinflation. That is not a concern right now, since deflation is a greater risk. The credit crisis was caused by over-leverage, and the winding down of that leverage has caused a 27% decline in housing prices and more than 40% decline in the stock market. These are not captured in the government's inflation report. Once the economy is back on its feet, Obama and the Fed can enact measures to stem inflation.

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