Now that Barack Obama has won as President, a great deal of uncertainty has been removed, which has helped stabilize the stock market and add investor confidence in the economy itself. However, many of his measures can't be implemented until well into 2009, even with a Democratic majority in Congress. Obama has three economic plans - an economic stimulus package, a plan to address the mortgage crisis, and his long-term economic platform.
Economic Stimulus Plan
- Energy rebates of $1,000 per family funded by a tax on oil companies. Increased home heating cost aid.
- Extended unemployment insurance and a temporary tax suspension on those benefits.
- Penalty-free withdrawals of 15% from retirement accounts up to $10,000. Suspension of rules requiring retirees to begin withdrawing from those accounts six months after they reach the age of 70. - The first will encourage consumer spending, but should be removed to support retirement savings.
- A 90-day foreclosure moratorium. Encourage mortgage restructuring of Treasury and HUD mortgages, and through reform of bankruptcy code.
- Permanent tax cut of $500 individuals and $1,000 for families. Eliminate taxes for seniors making up to $50,000. A 10% tax credit for mortgage interest to those who don't itemize. Tax cuts would be retroactive to 2007, and rebates would be mailed.
- A $3,000 tax credit for each new hire.
- Loan guarantees of $50 billion to automakers for fuel efficient cars.
- Eliminate capital gains tax for small business investors. Extend the $250,000 small business capital investment write-offs.
- $25 billion for public works construction and $25 billion in additional state aid.
Plan to Address the Mortgage Crisis - Obama will streamline regulatory agencies, establish a financial market advisory group, improve transparency for financial disclosure, and crack down on trading activities that could manipulate markets. He would prohibit government aides from working on issues related to a former employer for two years and prevent them from lobbying after they leave.
These will help fix what broke the industry long-term, but won't help the immediate crisis.
Long-Term Economic Platform - In addition to the proposals already stated, Obama plans to:
- Provide additional tax relief to the working poor.
- Reduce carbon emissions through cap and trade, invest $150 billion in clean technologies, and increase fuel economy standards, and new building efficiency. He would also eliminate oil and gas business deductions,and double federal funding for basic research.
- Protect labor and promote free trade by reviewing NAFTA and ending tax breaks for outsourcing.
- Address predatory credit card practices by creating a Credit Card Bill of Rights,reforming bankruptcy laws, and capping payday loans at 35%.
- Protect homeownership and crack down on mortgage fraud by providing a 10% tax credit for those who do not itemize and creating a fund to help homeowners in foreclosure.
- End the war in Iraq, and reduce defense spending.
Programs that put money into consumers' pockets, whether directly through rebates and tax credits or indirectly through health insurance, will help boost the economy as soon as they are implemented.
Indexing the minimum wage to inflation won't aggravate inflation much, because these wages are so low that an annual 2-3% increase won't have as much effect as increases on the high end of the income gap. The measures to protect credit card consumers will help reduced debt without expanding the deficit.
Reducing the country's reliance on oil will reduce inflation by lowering oil prices. Increasing research in green technologies will provide new jobs, restore America's competitiveness by increasing our technical expertise.
Ending the war in Iraq will reduce the over $700 billion in annual military spending. This is the largest discretionary budget item, and greatly contributes to dangerous budget deficit and debt levels.
However, some measures will harm the economy. Adding too many labor safeguards to trade agreements will restrict trade and possibly be a deal-breaker for potential partners. Making labor and tax laws too restrictive on multi-national corporations will just cause them to relocate outside of the U.S. once and for all.
Overall, the plan is visionary and will help address many important issues in the economy, including relieving income inequality and reliance on foreign oil.
