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As stock markets shudder and government officials fear the nation is headed for recession – or perhaps is already in one – the political candidates have touted their plans both for short-term stimulus and long-term economic well-being.
President George W. Bush recently agreed with the U.S. House in principle on a $146-billion economic stimulus package. It would include tax rebates of $600 for individuals, $1,200 for couples, and $300 per child. There would be faster tax writeoffs for corporate investment as well as tax deductions for small business investment. The House passed the plan on Jan. 29, 2008, but the Senate has taken up its own version. Congressional leaders hope to meet a Feb. 15, 2008, deadline to get the package signed.
Here are some of the indicators that have officials concerned the U.S. economy is off track:
Homes sales down:
Existing U.S. home sales dropped to 4,890,000 in December 2007 from 6,270,000 in December 2006, down 22 percent.
Home prices down:
Median home sales price dropped to $208,400 in December 2007 from $221,600 in December 2006, down 6 percent.
Consumer Price Index (a measure of inflation) grew 4.1 percent for the year ending December 2007 versus 2.5 percent for the year ending December 2006.
A U.S. dollar buys 0.68 euro on Jan. 25, 2008, vs. 0.76 euro on Jan. 25, 2007.
Federal budget deficit growing:
Actual budget deficit for 2007 is $163-billion; projected budget deficit for 2008 is $219-billion, up 34 percent.
Public outlook gloomy:
Sixty-one percent of respondents believe the United States is in recession, according to a nationwide CNN poll conducted Jan. 9-10, 2008.
WHERE THE CANDIDATES STAND
Mitt Romney: Romney has said he supports the Bush package and would like to see it go further. Romney has one of the most detailed plans for economic stimulus. For individuals, he wants to permanently lower the tax rate for the lowest income tax bracket, from 10 percent to 7.5 percent. (In general, this would reduce taxes on about the first $7,825 of earnings for everyone.) He wants to eliminate payroll taxes for working seniors over the age of 65 and make savings for the middle class tax-free. As a way to promote savings, any taxpayer with adjusted gross income under $200,000 would pay no taxes on income earned from savings, capital gains and dividends.
For businesses, Romney wants to institute immediate 100 percent expensing of new equipment purchased by a business for a two-year period retroactive to Jan. 1, 2008. He wants to permanently reduce corporate tax rates from 35 percent to 20 percent over a two-year period. Romney also seeks to reform and expand Federal Housing Administration loan portfolio limits to allow larger loans to homeowners.
Among his longstanding economic positions, he wants to make the Bush tax cuts permanent, cut tax rates across the board, eliminate the estate tax, make permanent the research and development tax credit for corporations. He also opposes any increases in Social Security taxes and would like to curtail the growth of the Alternative Minimum Tax.
John McCain: McCain has said he intends to vote for the Bush economic stimulus package. His longstanding positions on the economy include eliminating the Alternative Minimum Tax and making the Bush tax cuts permanent. He wants to maintain current rates on dividends and capital gains. For businesses, McCain wants to permanently reduce the corporate tax rate from 35 percent to 25 percent; to allow first-year expensing of equipment and technology investments; and to make permanent the research and development tax credit for corporations.
Among other issues, he seeks to lower Medicare premiums and ban Internet and cell phone taxes. He emphasizes reducing spending by curtailing earmarks, subsidies and "pork-barrel" spending.
Mike Huckabee: Huckabee said the Bush stimulus plan is "better than nothing." He seeks to preserve and expand the Bush tax cuts. He wants to make college tuition tax deductible. He supports the Fair Tax, which would replace the income tax with a national sales tax of 23 percent. He wants to increase spending on defense, border security and infrastructure such as highways and bridges.
Ron Paul: Rep. Paul was one of 35 members to vote against the Bush stimulus plan on Jan. 29, 2008. He said: "HR 5140 does not provide the kind of permanent, deep tax relief that will protect long-term economic growth, and will actually compound the damage Congress has already done to the housing market." For individuals, Paul wants to eliminate the tax on Social Security benefits. He also wants to reduces payroll taxes, capital gains taxes and federal gas taxes. He wants to eliminate the taxes on tips for restaurant workers. Paul believes federal spending should be dramatically reduced. He also seeks a return to the gold standard, beginning with the recirculation of gold coins. He opposes the Federal Reserve's use of interest rates as a means to stimulate the economy.
Hillary Clinton: Clinton said she is "heartened" that Bush intends to negotiate a stimulus package with Congress, but has not yet committed to voting for it. As a short-term stimulus, Clinton supports home heating and mortgage subsidies, as well as a $40-billion tax rebate. She has said that if the government approves tax rebates, it should also provide relief for Americans who don't pay income taxes, such as seniors and the working poor. She proposes an expansion of unemployment benefits.
For individuals, Clinton seeks to extend the Bush tax cuts for the middle class and roll back the cuts for those with incomes over $250,000. She also wants to offer up to $1,000 in matching tax cuts to help families save for retirement. She wants to expand the earned income tax credit, increase tax credits for child care, and provide a new $3,500 tax credit for middle-class college expenses. She plans to offer tax credits for energy efficiency and alternative energy measures.
She also wants to create a fund to prevent foreclosure for at-risk homeowners. She wants a 90-day freeze on foreclosures for subprime mortgages and a five-year freeze on interest rates for subprime mortgages.
Mike Gravel : It's not clear where Gravel stands on the Bush stimulus plan. Gravel recently called for Bush's impeachment. Gravel also supports the Fair Tax that Huckabee supports.
Barack Obama: Obama has criticized the Bush stimulus package for not extending benefits for the unemployed and for not giving aid to workers with low incomes who don't pay taxes. He has not committed to voting for or against the stimulus package. Obama's own short-term plan calls for an immediate $75-billion tax rebate, which would be a $250 tax cut for workers and a $250 bonus to seniors in their Social Security checks. He allows for the possibility of repeating these cuts if the economy does not respond. He also wants to create a fund to prevent foreclosure for at-risk homeowners. He wants to extend and expand unemployment insurance.
As part of his overall economic package, Obama supports a $500 tax credit that would reimburse workers for payroll taxes. He also supports expansion of the Earned Income Tax Credit and a mortgage interest deduction for nonitemizing taxpayers. He wants to eliminate taxes on seniors making less than $50,000. He supports tax credits for college tuition and child care targeted to low- and middle-income families. He seeks to roll back the Bush tax cuts for the wealthy.
For business, he wants to make permanent the research and development tax credit for corporations. He wants to eliminate capital gains taxes for start-up businesses.
Alternative Minimum Tax : The AMT was originally intended to make sure wealthy Americans pay taxes. But it's not indexed for inflation, so every year more middle-class Americans end up having to pay taxes under the AMT. Taxpayers will suddenly come under its sway if they make more than $75,000 and receive significant deductions for several children, high state and local taxes, or interest from second mortgages, among other things.
Research and development tax credit : This is a business tax credit for research and development in the fields of engineering, manufacturing, software, chemicals, defense and other sectors considered important to American innovation. The tax expires every few years, but Congress regularly re-enacts it.
Dividends : Dividends are payments made by companies to their stockholders as a means of disbursing profits. Taxes on dividends specifically tax these payments.
Capital gains : A capital gain is a profit on the sale of an asset, usually stocks, bonds or property. Taxes on capital gains specifically tax those profits.
Earned income tax credit : This is a tax credit aimed at low-income workers; it is generally considered an antipoverty initiative. The credit reduces or eliminates the tax burden for low-income workers.
Unemployment insurance : These are payments to workers who have been laid off through no fault of their own. (It does not apply to those who quit their jobs.) Payments and length of time vary by state.
National Association of Realtors, Home Sales Report
Congressional Budget Office, Budget Outlook
U.S. Labor Department, Bureau of Labor Statistics, Consumer Price Index
Mitt Romney campaign, The Romney Agenda: The Romney Economic Stimulus Plan
John McCain campaign, McCain Tax Cut Plan
Mike Huckabee campaign, Issues: Taxes/Economy
Hillary Clinton campaign, Remarks from Hillary on the Global Economic Crisis , Jan. 22, 2008
Hillary Clinton campaign, Clinton Unveils Aggressive Plan to Jumpstart U.S. Economy , Jan. 11, 2008
Barack Obama campaign, Fiscal Issues
Barack Obama campaign, Barack Obama's plan to stimulate the economy
John Edwards campaign, Building One Economy With Tax Reform To Reward Work
John Edwards campaign, Edwards Unveils Stimulus Plan To Strengthen Economy And Create New Jobs , Dec. 22, 2007
New York Times, Bush Proposing $145 Billion Plan to Spur Economy , Jan. 19, 2008
Washington Post, Whose Stimulus Makes the Grade? , Jan. 23, 2008
New York Times, Republican Debate Transcript , Jan. 24, 2007
Chicago Tribune, Clinton, Obama Focus on the Economy , Jan. 24, 2008
Associated Press, Republican candidates applaud economic stimulus package at debate , Jan. 24, 2008
Kansas City Star, "Economy shoves other campaign issues aside," Jan. 26, 2008
National Public Radio, Obama criticizes Bush stimulus plan , Jan. 23, 2008
U.S. Congress, Roll Call vote for H.R. 5140, Economic Stimulus Package