According to the Federal Reserve, $789.5 billion is almost as much as all the money currently in circulation in the U.S. ($829 billion). If the “stimulus” legislation were a nation’s GDP, it would be the 16^th largest economy in the world.

Yes, it is big, and yes, it probably represents one of the largest pork barrel spending efforts in history. However many earmarks have been slipped in, there are a few positive points. One being the American Opportunity Tax Credit… presuming the nation gets a positive return on this investment. Which is pretty large in and of itself (also from the gop.gov site):

College Tax Credit: Creates the American Opportunity Tax Credit, which gives tax credits to students and parents for the cost of post-secondary tuition and expenses.  The conference report provides $2,500 in tax credits per student and in 2009 and 2010.  40% of this tax credit would be refundable.  This provision would cost $13.9 billion.

So how can $13.9 billion help everyone, especially if it targets only college students (and possibly their parents) and consist of a partially refundable tax credit? The tax credit implies paybacks to those not even paying taxes. In GOP lingo, this amounts to a welfare program:

Refundable Tax Credits: Contains billions in refundable tax credits to provide direct payments to individuals that that pay little or no income taxes. Unlike tax cuts, these refunds do little to spur growth, create more jobs, or stimulate the economy and are more similar to new spending through tax policy than actual tax cuts.

Congressman Fattah’s H.R. 106, which I’ve mentioned in a previous post, doesn’t exactly create jobs, but it does make college students work for the tax credit. And will make better college graduates. Let’s start with the immediate return on the investment.

Any one of us, even those at the top of the economic ladder, are effected by organizations such as the American Red Cross. It might be a house fire, environmental event, or even receiving blood at a hospital. And this help comes from tireless volunteers that take the time to provide basic services in times of need that the government can’t. Perhaps if we chose a socialist government, we wouldn’t need volunteer services. Until then, these organizations are the life blood for many. It isn’t about welfare. It’s about helping in times of need. The more volunteers we have, the less these non-profit agencies must rely on government support. Service is fundamental to the American ideal. College students and retirees make up a considerable portion of the volunteer population. HR 106 can turn the American Opportunity Tax Credit in the American Recover and Reinvestment Act into an investment for service that will effect all Americans, not just college students.

And the part about making better students? Service Learning is about students applying what they learn in the classroom to real world experiences. They don’t do this as employees (they aren’t professionals yet), but rather as volunteers. This authentic component to learning has been proven to be effective in increased student achievement. It also ties students to their communities. They have the opporunity to learn the needs of the world outside of college, making them better prepared to enter the workforce. And the connections are lasting. Relationships are built with these organizations and their communities which create better citizens and leaders. HR 106 is a good long term investment in the future of our nation’s workforce.

Here’s some additional impact I can see:

1. Students who need the extra income to pay for college expenses can fore go the fast-food employment for volunteer work that is meaningfully connected to their studies. Those jobs can be made available to others in need.
2. Non-profit groups dependent on fund raising to pay for positions are feeling the economic pinch just like businesses. HR 106 can provide necessary volunteers needed to fill once-paid positions until the crisis abates.
3. Our economic and political model depends on non-profits and church organizations to fulfill the role of social organizations. Service is fundamental to the American way of live. Students need to have this ideal ingrained to continue to support this effort after graduation.

The American Recovery and Investment Act is bloated. Let’s make the best of it by supporting legislation that can redirect how some of the funding is dispersed. HR 106 is an excellent example of insuring a positive return on this huge investment.

“American Opportunity” Education Tax Credit.  The bill would provide financial assistance for individuals seeking a college education.  For 2009 and 2010, the bill would provide taxpayers with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year.  Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year.  Forty percent (40%) of the credit
would be refundable.  This tax credit will be subject to a phase-out for taxpayers with adjusted
gross income in excess of $80,000 ($160,000 for married couples filing jointly).  This proposal is estimated to cost $13.907 billion over 10 years.

Congressman Fattah (D-PA) details the impact of the stimulus package on this press release:

“This legislation provides a significant down payment on the concepts contained in H.R. 106, the American Opportunity Tax Credit Act of 2009, which I introduced on the first day of the new Congress. Modeled after President Obama’s campaign pledge of college education for all, the package will provide $2,500 refundable tax credits for college tuition for young people from low income families who might otherwise miss this opportunity to improve their prospects in the work force. This tax credit is partially refundable – a critical provision for low-income students. The Stimulus also directs the Treasury Department to study the feasibility of requiring 100 hours of community service in exchange for the tax credit.