Tuesday, October 14, 2008

Obama's Economic Recovery Plan

Senator Obama has five new ideas in and article on CNN Money this morning. Some aren't too bad. Here is my opinion:

Relax rules on emergency withdrawals from retirement funds.

A plant in our area pays its workers extremely well. The average production worker can make over $70,000 annually and with overtime it is not unusual for workers to make in excess of $100,000 a year. Yet, every three months their pay system has one week where the hours of work on the pay check are 36 instead of 48. When that happens there is a rush to the personnel department to borrow against their 401(k). My point is I'm not sure if people would use the money to stave off the wolf from the door or it would be just a means of sustaining a life style they shouldn't be at anyway. It probably won't be repaid, plus the tax liability will be foregone and Uncle Sam will be down in tax receipts. I do not think this is a good idea unless they could come up with a method of proving need, for example to be applied against a mortgage payment, or in an unemployed situation.

Give Seniors a break in a bad market.

While this won't effect me, I agree with this position. Why penalize a person's IRA with a withdrawal made when the market was high. This economic difficulty should not penalize those who saved and developed enough savings or investments on their own that they wish to protect. The article goes on to say that in this instance, Obama agrees with McCain's idea. Hmm!

Have the federal government finance state and local governments.

I don't know about this one. Some of those governments are in areas that went through an inflated economic real estate boom that has turned out to be more speculative that real. Yesterday I hear the mayor of San Diego say that his city has simply lived beyond its means. Departments that may not be needed have been created, services that are nice to have may have been created, perhaps there should be some real retrenching before we finance overspending at the local and state level.

Encourage job creation

On the surface it sounds good. However, it is the usual liberal ploy that won't work. They would give a $3-5000 tax credit to companies for every full-time job they create. It doesn't work that way. What you are really telling businesses to do is create jobs when they are not needed. Business operates in a competitive, fairly free market condition. They are not going to add jobs simply for the sake of a tax credit. The tax credit does not even come close to offsetting the cost of a new job creation. This is a stupid idea. Better to resurrect the public works programs FDR created back in the 30's to get income into the hands of people. At least you would get some work done, and the program could be phased out as the economy recovers.

Extend unemployment benefits for 13 weeks beyond the 24 week period.

As much as I do not like something for nothing, this may have to be done. However, I like the idea of redistributing the money through public works. There are a lot of roads and trash that need picking up. There are public areas that need to be refurbished. How about the idea of getting something instead of just giving money away so a guy can go fishing every day.

In general I don't think Obama's plan will be implemented in time to do much good. I question what good it will do. There are a couple of items that I think will have to be implemented, however one of them appears to be an idea put forth by John McCain. So where is the change, the new ideas in this proposal. Many of these ideas are old hack ideas that have surface and been implemented in past years. Nothing new here.

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