It would be quite clear that it would be a lie for me to claim I was some type of young economist on top of all the issues our economy faces today. I traveled from great distances, and searched through ancient ruins, I have even sat through long overdrawn family discussions trying to completely grasp what has happened to the United States’ economy. Even though for me too completely grasp the concepts behind the historic changes that have gone on these past two months is still a task to be completed the economy is still a pressing issue for my family and myself.
How will my already struggling family keep our house? How will I pay for college? How will my relatives and I maintain our jobs? What will happen to my father’s retirement fund before he even retires? These pressing questions fill the heads of all those Americans that are sitting at those dining room tables that John McCain, Sarah Palin, Barack Obama, and Joe Biden all insist that too are sitting at (even though their tables are places under crystal chandeliers).
A couple of other questions I also find myself pondering at the table are how did this supposed great capitalist country of ours find itself in such turmoil? What made this historical $700 billion bailout necessary? And what do I want my candidate for the next President to believe in and fight for to fix this major issue that not only is troubling the United States but as of recent the world?
Before it is time to look at Senators Barack Obama and John McCain’s economy plans it’s time to attempt briefly look at how we got here for those of who view the world of finance as that foreign country you may just have never heard of and can’t find on a map.
Sub-prime Mortgage squats, Credit crunches, Fat Cat sprints
After the attacks on September 11th borrowing simply became easier. Spending was encouraged when a low federal funds rate was created. For the time being after 9/11/01 the economy slowly began to improve and the economy could prosper, but an outpouring of money, easy to get loans, credit, and mortgages brought us to where we are today. The idea to motivate the American people to spend, spend, spend, and invest began to back fire.
Lower interest rates made it easier for many to purchase homes, and to get credit. Perhaps it became a bit too easy to do so. Soon the sub-prime mortgage crisis everyone keeps referring to was on its way. Banks were making it illogically easy for people to purchase homes. The sub-prime mortgages began to become packaged deals for the mortgage securities companies that we now see slowly meeting their demise. These sub-prime mortgages began to be purchased by companies such as Fannie Mae and then made it possible for the stock market to get their hands on these “wonderful” sub-prime mortgages. The problem with these companies getting their hands on these sub-prime mortgages was that the mortgages started to default.
While these repackaged sub-prime mortgages were strolling around Wall Street and destroying our economy, those Fat Cats we always hear about have been leisurely jumping from their high rise buildings with those “golden parachutes” and landing on top of jets that swept them away to luxury resorts. Over the past few months fingers have been pointed all directions as who is to blame for the current crisis. Is it the banks that gave out mortgages to the unqualified, is it those on Wall Street who feel none of the true horrid effects of what is going on and who can be credited for toying with money, or is it the government who sat with their backs turned to Wall Street? The answer is . . . all of the above.
To really in-depth break down the factors which have caused the economy to spiral out of control take a look at the following links.
- About.com: Understanding the Sub-prime Mortgage Crisis
- Investopedia.com: The Fuel That Fed The Sub-prime Meltdown
From both of these links I’ve provided you can follow the yellow brick road of links these individual sites provide. Each site provides good basic insight on the issues that have played a major role in effecting our economy.
The End Result: The Bailout
And bam there you have it a bailout plan that deserves its own movie, holiday, Super Bowl type event. Not that the bailout is a plan to be celebrated but it is a plan that is notably massive. It is a plan that is icing on the United States already massive debt.
The Bailout in simplest dumb down terms is that it’s going to buy up all the bad debts acquired by the banks in order to restore the capabilities of the banks to restore functioning. The Bailout is an extremely important topic to discuss but for once I’d like to take my time to look at the plans that Senators Obama and McCain have come up with pre and post Bailout.
The Candidates
I would like to address only two issues I feel the candidates need to most importantly analyze and address those issues being: Taxes and Mortgages. I have linked their websites so you can read on the issues related to the economy you find most important.
Barack Obama on Taxes
Barack Obama claims he will eliminate some income tax, and cut taxes for working families. According to Obama’s site he would provide millions of American workers with a relief. A “Making Work Pay” credit of $500 for each person and $1,000 per family would be provided under Obama. This would essentially eliminate for certain Americans income tax. Obama would also like to directly eliminate income taxes for senior citizens who make less than $50,000 per year in hopes of them saving a supposed average of $1,400. He would also like to raise taxes on those whose income is $250,000 or above.
As Obama eliminates income taxes for certain Americans he would raise the income tax rates from 33% and 35% to 36% and 39.5%
When it comes to trade taxes, Obama would like to eliminate the tax breaks that companies receive for outsourcing jobs to foreign countries. Along with attempting to maintain and create more jobs by eliminating the tax breaks to companies sent overseas, Obama would along with certain income taxes eliminate all capital gains taxes on new small businesses. Obama would do so in order to promote job creation and a break for these businesses.
Barack Obama on Mortgage Fraud and Credit Practices
Obama would like to give a mortgage interest tax credit. He would like to give a tax cut to many homeowners who make under $50,000 per year a savings of at least $500. Obama in his plans also outlined a plan to prevent the type of fraud and predatory loans that caused the sub-prime mortgage crisis. His STOP FRAUD act would federally define fraud, and would require a closer eye to watch over lenders. Obama would also like to establish a “Credit Card Bill of Rights” the rights would include the banning of unilateral changes, prohibiting interest on fees, prohibiting of universal defaults, and require prompt and fair crediting of cardholder payments.
John McCain on Taxes
John McCain will keep the tax rate at its current 35%, and he would also keep the 15% rates on the capital gains tax and dividends. McCain would then cut the corporate taxes from 35% to 25%. McCain would also prohibit and ban taxes on the internet and cell phones. Essentially under John McCain the taxes maintained now would essentially remain.
McCain on Mortgages: Maintaining the Home
Under John McCain families will be able to trade in “a burdensome mortgage for a manageable loan that reflects their home’s market value”. If you are in ownership of a sub-prime mortgage from after 2005 you can participate in McCain’s plan.
Obama and McCain as of today.
Both McCain and Obama have made notable additions to their economic proposals.
Within this past week Obama expanded his plans, including a plan to give “Americans penalty-free access to retirement savings” to aide in the hard times many Americans are facing. He also added that he would give businesses a $3,000 tax credit for the next two years during this pressing time.
The New York Times Obama Update
Suddenly McCain has decided as of today that what I just wrote above is going to be momentarily changed. The 15% capital gains tax in McCain’s new proposal would be moved to 7.5% for the time being. He would also allow Americans ages 59 and up access to their retirement funds at a 10% tax rate.
The New York Times McCain Update
Opinion
Both John McCain and Barack Obama have many individual issues their economic plans address. I’ve only highlighted what they plan to do about taxes and mortgages because it’s an important issue constantly thrown around in the media but I never hear exactly what these candidates plan to do. I find some of Barack Obama’s plans for taxes very interesting and am glad I have found the time to find out exactly what Obama would like to do and not just hear from television ads he would like to raise taxes. I also think his plans regarding Mortgage Fraud are legitimate. As for McCain the few lines I have provided is all I could really pull regarding his tax and mortgage plans. As for taxes he seems to find that no reform is necessary. I do though think his exchange of sub-prime mortgages for manageable loans is mildly reasonable.
Overall I feel McCain has danced around the issue of the economy and made it more of a spectacle than a pressing issue. I admire personally Obama’s persistence in emphasizing a plan rather than putting on a media show as McCain has done the past two months. I also believe that the new developments in both of their new proposals is a little senseless. Yes maybe it does seem convient to get our hands on money right now, but what is the sense in promoting people to take money from their retirement funds, that will simply promote people taking money from the market.
The United States economy has be traveling down a dangerous road and in less than a month it will be time for us to choose a new president who could possibly lead us into better times or into much harder times. So here are my questions for you:
- How important is the economy as an issue to you personally and will it help determine who your vote for come November 4th?
- Which candidate do you believe has stronger plans and goals for the economy, and why?
- What in your opinion do you think these two candidates need to focus on more heavily pertaining to the economy?
- What do you find troubling about both candidates economic plans?
UCC Honors: Blogging the '08 Election 