The Economy, the Candidates, & You

In The Economist yesterday (header links to this article), it reads:

Even if the Fed did target zero, it might encourage banks just to leave their money at the Fed rather than lend it to each other, causing the federal funds market to dry up. It would also make it hard for money market mutual funds to pay a competitive yield and cover their operating expenses. Money would flow out of them and into government-guaranteed bank deposits, straining bank capital ratios.1

The article deals with the current federal interest rate drop (down to 1%). The article also notes:

Bold as its actions have been, the Fed cannot battle the recession alone. It needs fiscal policy as well, both to recapitalise lenders through the Troubled Asset Relief Programme–both banks and nonbanks, such as insurers—and to stimulate spending directly through increased public spending or tax cuts.2

John McCain's Plan 3
According to his website (just the key items), McCain promises the following to help the economic crisis:
1. Balance the budget by 2013 by cutting Social Security, Medicare, & Medicaid
2. Lower business tax rates & reduce capital gains taxes
3. Minimizing health insurance & pro-union initiatives
4. A one-year spending pause
5. Stop earmarks
6. He'll tell oil producing countries that our foreign-oil dependence will come to an end
7. Summer gas tax holiday (nothing about winter on his site)
8. Repeal the imported sugar tax
9. Will roll back corn-based ethanol mandates
10. Assistance for borrowers focused on homeowners
11. Reforms like greater transparency & accountability with financial assistance

Barack Obama's Plan 4
According to Barack Obama's website (again, just the highlights):
1. A tax cut to 95% of working families
2. Tax relief for small businesses
3. Fight for fair trade to open markets; amend NAFTA
4. A windfall profits tax on oil companies, given to families as $1000 energy rebate
5. Provide $50 billion to jump-start the economy, saving 1 million jobs
6. Eliminate income taxes for seniors making less than $50,000 per year
7. End tax breaks for companies that send jobs overseas; reward companies that support American workers
8. Invest in next generation technologies, clean energy, infrastructure
9. Invest in a clean energy economy, creating new jobs
10. More accountability in subprime mortgage industry, reform bankruptcy laws, credit card bill of rights

Both sites have more details, but Obama's seems especially extensive. You be the judge. Will either plan do what needs to be done to combat the current recession and financial irresponsibility? See a side-by-side comparison done on the Obama site at http://www.barackobama.com/issues/economy/sidebyside.php. 5


Sources
1. Approaching Zero, The Economist, Oct. 29, 2008, http://www.economist.com/finance/displayStory.cfm?story_id=12500565&source=features_box3.
2. Ibid.
3. http://www.johnmccain.com/Issues/JobsforAmerica/reform.htm
4. http://www.barackobama.com/issues/economy/index.php
5. http://www.barackobama.com/issues/economy/sidebyside.php