Before anyone can accurately predict how the rescue plan will help the future of the U.S. economy, it is important to take a good, hard look at the root of the problem. Yes, the subprime mortgage crisis was caused from the lending and selling of mortgage bundles that lacked backing collateral, as I have mentioned before. Taking this even further though, I am going to agree with "The Digerati Life" blog, which claims the fall of the U.S. economy can be traced all the way back to the dot com crash of 2000, followed by the 9-11 attacks.
146,100 jobs were lost in NYC just due to the direct attack. The markets were closed for several days and faced an immediate crash after reopening. For fear of a major recession, the Fed (which was already in the process of cutting Fed Fund rates after the dot com crash) cut rates even further. This created a boom in borrowing...money seemed to be moving more freely in the economic market...and thus inflation was on the rise. Inflation caused the value of homes to increase, and since credit was easily attainable, many people began investing in property they had no real money for...alas the crisis we are in now.
Not to forget the Iraq war we are engaged in, which isalso a direct effect of 9-11 and has been going on for seven years and counting. So far, the war has cost the U.S. over $500 billion in upfront costs...only contributing to national debt and taking out of taxpayers money.
The problem with the hefty debt the government and consumers are faced with, is now credit is much tighter, making it harder for those who were living beyond their means to live comfortably anymore. People are collapsing under their debt, foreclosing on homes, many have lost their jobs, and now have ruined credit lines. And really everyone is affected.
So out comes the rescue plan...Whats my theory on the outcome of this bill? Is it going to work? Yes, because it HAS to. It seems that as more and more ideas have been proposed for the bill to create jobs in different sectors to help the economy, and put money towards infrastructure, etc., the plan has gotten further away from solving the problem. Thankfully, congress is starting to realize that and take more conscious steps to a focused plan. With talk of a second stimulus package being implemented, legislators became wary because they felt if it was not enacted at the right time with the right measures, then it wouldn't help the economy.
In relation to the election, both candidates want to cut taxes and help those who are unemployed. Money will have to be put into the economy for it to keep circulating, but those who don't have the money should be helped. I think McCain's proposal to cut taxes on capital gains is a great idea and will help secure the housing market, and consequently allow investors to feel they are making more finacially sound decisions. Obama's plan to put money towards other programs to stimulate the economy is great on paper, but for this plan to work, it has to stick to the basics initially. A multi-step plan, addressing the most dire economic pains first and then less consequential ones later, will help the country long-term towards a better future. Thankfully, both candidates propose to cut unemployment benefit taxes, which illustrates a common understanding between the two candidates to focus on the most important issues first. Cooperation, patience, and diligence between the government and the people, along with timely implements in the bill, will allow the rescue plan to help the U.S. economy.
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