The candidates come up with these plans because they know Congress will never pass them.
Obama's Plans for Fiscal Stimulus
WQSJ ECONOMICS BLOG
Austan Goolsbee, the University of Chicago Graduate School of Business economist and adviser to Barack Obama, says the Illinois Democrat saw the need for fiscal stimulus before other presidential candidates did.
Goolsbee flew from Cedar Rapids, Iowa, to the American Economics Association meetings in New Orleans, where he is something of a minor celebrity as is Jeff Liebman, an economist at Harvard?s Kennedy School of Government, also on the Obama team.
Presidential candidates may not be able to implement their policies now, but they "should put forward ideas and ask the president to do them" and demonstrate how they would handle current circumstances, Goolsbee says.
Obama put his plan forward in the fall: A $500 per worker, or $1,000 per couple, tax credit that is meant to offset the first $500 of Social Security payroll taxes. The proposal is likely to get more attention in light of the sharp rise in the unemployment rate, spreading talk of fiscal stimulus and Obama?s victory in Iowa.
"There is at least going to be a significant slowdown,? Goolsbee says. ?With this jobs report, we hope it isn't spreading beyond housing and fin services.? The proposed Obama tax cut "addresses the middle class squeeze" and helps "prevent this from morphing into a drastic decline in consumer spending" Goolsbee says the proposal offers a sharp contrast to Republican calls to extend President Bush?s tax cuts.
?It?s not the job of presidential candidates to predict recession, undermine consumer confidence,? Goolsbee said. The Illinois senator is ?not telling the Fed what to do,? he added. ?Fed independence is a good thing."
Obama also has proposed a refundable tax credit for homeowners that do not itemize deductions on their tax returns equal to 10% of the interest paid on their mortgages.
The campaign says the credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.? Half of all homeowners do not itemize on their returns, Goolsbee said. Those who do itemize ? who tend to be upper income taxpayers ? may deduct mortgage interest payments.
Goolsbee said the credit would effective reduce mortgage payments for a substantial number of homeowners who might not otherwise be able to afford their monthly payments, though it wouldn?t help those who bought houses well above their means. Obama also favor voluntary renegotiations of mortgage deals to reduce payments to avoid foreclosure, changes to the bankruptcy laws and other measures. -David Wessel |
