Grim Outlook On the Economy Right Before the Elections
As retail sales decline, manufacturing slows and unemployment benefit claims rise, the economic situation looks more grim by the day. Rises in the stock market that show a glimmer of hope are invariably followed by dips. The housing markets declines steadily and the recession shows signs of lingering well into next year. George Bush has called for a mid November summit to discuss the international economic situation. (Reuters)
With the U.S. Presidential elections less than two weeks away, both candidates are heavily focused upon the economy as their chief task. The declining economic situation propelled by the fall of Lehman Brothers has certainly worked in Obama’s favor. People are associating the bad economy with Republican values. Both candidates have outlined an aggressive economic recovery plan.
- $300 billion (of the $700 billion bailout package) to buy troubled mortgages and replace them with fixed-rate mortgages.
- Cutting the first $50,000 of withdrawals from IRA and 401(k) retirement accounts to 10 percent for the next two years.
- Suspending rules that require retirees to begin withdrawals from retirement accounts six months after they reach the age of 70. The delay would allow retirees to ride out the current market crisis and stock market decline.
- Increasing capital loss write-offs from asset sales to $15,000 from $3,000.
- Cutting taxes on long term capital gains, currently at 15 percent, to 7.5 percent for two years.
- Exempting unemployment benefits from taxes for two years.
Democrat Barack Obama‘s proposed $60 billion economic rescue package includes:
- $3,000 refundable tax credit for businesses that hire full time employees in the United States over the next two years.
- Small business write offs up to $250,000 for new equipment and property through the end of 2009.
- No capital gains taxes on investments in small businesses.
- $25 billion for the construction and repair of roads, bridges, schools and other infrastructure.
- $50 billion in loan guarantees to help U.S. automobile manufacturers retool and develop a new generation of fuel efficient cars. Congress has made $25 billion available.
- A permanent tax cut of $500 for most individual workers and $1,000 for families. Eliminating taxes for seniors making up to $50,000.
- Unemployment insurance for long-term jobless workers who have exhausted their benefits. Temporarily suspending taxes on those benefits.
- Temporarily allowing penalty-free withdrawals of 15 percent from tax-preferred retirement accounts up to $10,000.
- Suspending rules requiring retirees to begin withdrawing from retirement accounts six months after they reach the age of 70.
- Reforming the bankruptcy code to assist homeowners in mortgage restructuring.
- A 90 day foreclosure moratorium for homeowners making good faith efforts to pay their debt.
- $25 billion to states to help them cope with the economic downturn without having to raise property taxes or cut vital services
- 10 percent refundable tax credit for mortgage interest to taxpayers who do not itemize their returns.
Both plans address individuals and small businesses. John McCain’s plan promises to focus on people individually however Barack Obama’s plan focuses on a ‘collective’ economic recovery package.
What do the people think?
Obama’s “spread the wealth” statement did not sit well with people like Joe The Pumber who has indicated that Obama’s economic plans point towards socialism. Is this a fact? From what I can tell, it is not like Obama is taking away the focus from providing incentives to small businesses that will fuel the economy. And with a broader social outlook that provides for the development of infrastructure and fuel efficient cars, Obama promises to promote sustainability.
Sarah Palin has pointed out that the current economic crisis should not be used as an excuse for reckless spending; that any measure to take more dollars away from businesses will destroy the entrepreneurial spirit of America as it is against the principles of capitalism. Peter Schiff, economic adviser for Ron Paul’s 2008 presidential campaign might agree with her:
“The United States reached its economic preeminence on the strength of its free markets. So far, the economic disaster exacerbated by government policies is creating opportunities for further government interference, which will lead to bigger catastrophes. Binding the country to a tangle of socialist ideals will seal our fate as a second-rate economic power.” (The Washington Post)
What do you think? Do we have a socialism vs. capitalism debate on our hands as we head towards the election polls?