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Republicans Counter

House Republicans today unveiled their own economic stimulus program in response to what President Barack Obama is pushing. There are some good ideas in the GOP's plans and some not-so-good ideas.

Among the good ideas is an across-the-board cuts in the two lowest income tax brackets, placing unemployment benefits off-limits to taxation, and a tax cut for small businesses. Since so much of our economy is fueled by consumption a tax cut for lower income families makes sense to me and I've never understood the point of taxing unemployment benefits (or student loans, for that matter). And since the majority of new jobs created in this country come from small businesses, I can also get behind a tax cut for those companies to encourage growth and capital investment, which will result in jobs and not dividends as you might find with similar cuts for large corporations.

What I find odd is their proposing a new $7,500 break for home buyers who make a minimum down payment of 5 percent. My problem with this is there's a very similar program already on the books (and which runs out this summer so if you CAN buy a house, now's a good time), plus the reason housing is stalled right now is because nobody has cash and the banks have tightened credit so even if you could save 5% there's no guarantee that you'll find a mortgage.

Those are relatively minor beefs I have though. Where we really part ways is on reigning in of federal spending, something that was missing from Republican concerns during eight years of Bush but is now suddenly critical to saving us from disaster now that a Democrat is in office.

"Rather than spending too much, too late as the congressional proposal does, our proposals let the American people keep more of what they earn to spur investment, encourage savings and create more private sector jobs," John Boehner, the GOP's House leader, said in a statement.

Of course, most Americans don't own their own business so saving is maybe not what we really want now anyway and the spending programs Obama is proposing largely include infrastructure improvement programs the country needs anyways (see: falling bridges, water main breaks, and crumbling highways). While the GOP seems to have no problem dumpings billions a month into rebuilding Iraq's infrastructure (with no bid private contracts, mind you), they seem dead set against ensuring your own country's foundation meets at least third-world standards.

Someone give the Republicans shovels, they seem intent on digging!



there's a perfect storm of liquidity happening as we speak. between last years stimulus package and the steep price drop at the pump as a nation we've realized an adjustment in public liquidity of roughly $400 billion, $150 billion and $250 billion respectively. that's a pretty interesting number in and of itself. but now look at the movements of the banks. they are adjusting credit cards rates upward dramatically. why would they do that if the bank lending rate is so low. there hasn't been a big default rate happening. in fact, the public's fiscal reaction has dramatically shifted to saving and paying down debt. yes, there has been some foreclosures, but those have been maintained a a manageable level in my opinion. so, all this is a signal that the fed is expanding the money supply, while keeping interests rates low. this will pump some additional liquidity into the system. eventually, the bank lending rate will begin to increase while the fed continues to expand money supply to hedge potential effects of inflation. with all this liquidity out there, i see a return to moderate consumption. all this while gas prices will remain manageable and retailers will be holding prices down in reaction to a bad 2008. further making it comfortable for the consumer to return to consumption.

so, the banks are getting capital in two ways... by the government and by the public paying down debt and saving. looking for some managed lending in the next year and an economy slowly returning from the shaky past year and a half.

hell, housing purchases upticked this past month. there are banks lending. people are refinancing. and odds are the fed is going to expand the money supply.

there is a lot of money out there, but only for people who have a great deal of money and great credit.

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