It's All About the Economy

On the final stretch of the campaign Barack Obama and John McCain are talking about the economy.

Democratic leaders in Washington are considering calling in the United States Congress to an extraordinary session right after the election on November 4th, to pass an economic package with the aim of creating one million new jobs. The package would also protect vulnerable social groups against the negative consequences of the economic crisis.

The package will cost at least 150 billion dollars. Economists connected to the Democratic party and Barack Obama’s campaign called on Congress to put forward a package worth 300 billion dollars during a meeting Monday, according to The Wall Street Journal.

According to the newspaper the Democrats will only initiate the session if Obama wins the election and the party expands its majority in Congress, something all polls indicate. The Obama-camp are actively involved in the discussions, and Obama has supposedly raised the topic in talks with Nancy Pelosi (D), speaker of the House of Representatives.

Obama is careful in directly supporting the measure, in fear of being accused of “taking measurements for curtains in the oval office” three weeks before the election. But when Obama showcased his economic program this week, he did say this: “We must have an economic stimulus package for the middle class, and it can’t happen in five days or next year. It has to be done now”.

On Tuesday in Pennsylvania the Republican candidate John McCain put forward a new and expanded version of his economic program that, first and foremost, aims to help pensioners and small businesses. McCain suggests that older Americans should pay just 10 percent tax of capital they are taking from their pension funds for the next two years. And that investors should be able to deduct 15,000 dollars in losses at the stock market on their tax return, instead of todays 3000 dollars.

McCain also suggests cutting the tax on capital gains in half, to seven percent, and to stop the taxation of welfare benefits for 2008-2009. According to McCain’s economic advisor Douglas Hotz-Eakin the package would cost a total of 53 billion dollars.

At the same time McCain is sticking to his controversial idea of letting the federal government pay for the refinancing of three to four million home owners’ loans, so that instalments and interest would correspond to the new, lower value of the house.

“The federal government did this during the great depression. If we help families that risk not being able to pay, and are facing foreclosures, it will stimulate the economy”, John McCain said on Tuesday.

Such a measure would cost 300 billion dollars, money that would be taken from the 700 billion dollars Congress has raised to solve the financial crisis.

Bush’s new package

On Tuesday President George W. Bush announced that his administration was intending to inject 125 billion dollars in the form of stock market capital in the country’s nine largest banks. The purpose is to raise confidence between banks, and loosen up the frozen credit market. As a minority shareholder the administration would have the right to put a cap on payments for bonuses, golden parachutes and dividends.

Another 125 billion dollars would be injected into thousands of smaller banks, so that the entire American banking sector would be partly nationalised within the next few years.

Obama supports the plan

Barack Obama has expressed his full support for the administration’s proposal worth 250 billion dollars. His rival John McCain seemed to distance himself from the proposal during his speech in Pennsylvania this Tuesday. McCain did not address the Bush plan directly, but said that as president he would “have the government stop giving economic support to business, and not invest in stock -the government should be limited to regulation”.

Obama’s new economic proposal worth 175 billion dollars – that was put forward on Monday, has two main elements: it would give states a total of 50 billion dollars for investment in repairs, maintenance and building of infrastructure, something that would create one million new jobs. Families with an annual income of less than 250,000 dollars would get tax relief in the form of a check, that would cost the government 65 billion dollars next year.

High income groups would face increased taxes when the Bush tax cuts expire in 2010.

In addition Obama suggests prolonging the period of welfare payments, issue more food coupons to the poor, give higher grants to the states to cover health related expenses, and introduce a three month foreclosure postponement.

The two presidential candidates discussed the economy during the third and final debate.