The U.S. economy, along with any developed economy, experiences fluctuations within their economic cycles. The two main cycles consist of booms and recessions. With our current recession, it is imperative for the status and health of our country economically, that we start booming. The catch is not be too hasty though.
Congress has been talking about implementing a second stimulus package to jumpstart the economy. Democrats believe food stamps should be increased, more money should be invested in infrastructure projects, and rates on loan mortgages should be increased. Republicans are focused on tax breaks and incentives, with a heavy influence on cutting or eliminating taxes on capital gains. This would help those who are struggling with house payments or fear buying new property, to stimulate the housing market and raise property value once again.
Both McCain and Obama support eliminating taxes on unemployment benefits, which makes a lot of sense. It is not logical to tax struggling individuals on money they are recieving from the government. Sounds like extra red tape.
Thats the thing though; America has to be logical with economic decisions. The big question with the second stimulus package is when to install it. It would have to be implemented at the right time for the nation's economy to reap the most benefits. The first stimulus package was put into place last February and offered tax rebates, which clearly only helped in a short-term manner. With this plan Ben Bernake suggested to (as quoted by Jeanne Sadahi in a CNN Money article) "improve access to credit by consumers, homebuyers, businesses, and other borrowers." This seems like a short-sighted idea that would, again, result in short-term help for our crisis. Offering more credit to a country consumed in debt may temporarily boost the economy because people would be spending-but completely out of their means! This tricks the economy and creates those hasty and unstable fluctuations in economic cycles I mentioned previously-instead of long term help to ease staggering lows and sudden highs.
In closing on Tuesday, congress decided to not enact the second stimulus package quite yet. They are listening to ideas in hopes of implementing beneficial, smart changes-best move I have heard yet. Glen Hubbard (a former senior economic adviser to President George Bush) proposed for the U.S. government to buy negative equity from the private sector, which would restore mortgage rate levels to around 5 percent. He believes the U.S. might only need to spend $200 billion on the rescue plan if the government doesn't spend unnecessarily. Although we need our economy to start heading upward to its boom, it would be better to spend less, only where needed, and not make irrational, hasty decisions.
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3 comments:
Britney,
In the second paragraph, I became extremely confused. Does the Democratic view, the Republican view, or both views help struggling homeowners? On taxing unemployment benefits, how did that policy become legislation in the first place? On Hubbard's opinion on the required spending, the $200 billion he believes is needed is small, but do you think the government can achieve this goal?
Tommy
It is very interesting that it is Hubbard, an advisor of Bush's at least at one time, who is suggesting that we only need to spend $200 billion dollars instead of a lot more. In the bush administration it seems that the government has done a lot of unnecissary spending? Do you think that this is a rational idea? It would be great if mortage values leveled around 5%, but for all the hype and seemingless lasting problem we have on our it seems that these quick fixes that are being set in place may not be the best idea. What are your thoughts?
Tommy,
Sorry for the confusion...the Republican proposal of eliminating taxes for a variety of fields including capital gains, will help those who are struggling to make house payments. Both parties are interested in aiding this problem, but I put a larger focus on the Republican's tax breaks.
Because unemployment benefits are considered income, the IRS claims that all income is taxable...this legislation makes no sense...if the government is going to be greedy, go ahead and take out the taxes first and then send out the benefits. It is definitely not logical to ask for money back that was given out by the government. So thankfully they will be changing this.
Unfortunately, I don't think Hubbards idea of $200 billion will be enough because the AIG has already spent close to that amount in their share of the rescue plan...and the government is now saying they don't know how much more they can do to help the AIG because they simply cannot keep giving out more and more money.
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