Leading Democrats Call For Immediate Fiscal Stimulus

by Leroy Baker, Tax-News.com, New York

15 January 2008

With the United States teetering on the brink of a recession, Hillary Clinton and Barack Obama, the two Democrat Senators leading the race to become the Party's candidate for the 2008 US presidential elections, have urged Congress to pass immediate fiscal stimulus legislation

After President George W. Bush hinted heavily that he is mulling a new package of tax cuts to inject life into the ailing economy, Clinton and Obama have seized the opportunity to announce rival plans of their own, as the economy takes center stage on the presidential campaign trail.

Both Clinton's and Obama's plans concentrate on helping struggling homeowners overcome the housing foreclosure crisis, and giving additional financial help to working families and job seekers. Clinton's plan would also earmark USD25 billion to mitigate rising household energy bills, after the price of crude oil recently hit USD100 per barrel.

"Economists and politicians are finally waking up to what many of America’s families already know: that we might be sliding into a recession," a statement from the Clinton campaign observed.

"But when the bills are stacking up, and you’re just one pink slip away from losing everything you’ve got, the last thing you need is more talk. In the face of rising global competition, our children’s future is at stake. So we don’t need more rhetoric, we need action. We need an immediate strategy to get our economy back on track. I would work with leaders from both parties to pass an aggressive, fast-acting stimulus package to create good new jobs and revitalize our economy," the statement added.

Clinton claims that her 'five-point plan' would not negatively affect America's long-term fiscal position. Specifically, it includes: a USD30 billion Emergency Housing Crisis Fund to assist states and cities mitigate the effects of mounting foreclosures; a 90-day moratorium on subprime foreclosures and an automatic rate freeze on subprime mortgages of at least five years; USD25 billion in emergency energy assistance for families facing rising heating bills; accelerating USD5 billion in energy efficiency and alternative energy investments to jumpstart 'green collar' job growth; and USD10 billion for extending and broadening unemployment insurance for those who are struggling to find work.

Clinton also called on Congress to stand ready to provide an additional USD40 billion in direct tax rebates to working and middle class families if the economy continues to worsen.

Meanwhile, Obama has been quick to respond to his main rival, with proposals for an "immediate" USD250 tax cut for workers, offsetting payroll tax paid on the first $8,100 of earnings, and a further USD250 tax credit per worker if employment declines three months in a row. He also called for a temporary USD250 "bonus" in Social Security checks intended for those who would not get the tax credit, plus another USD250 payout if employment figures fall for three consecutive months.

Obama also wants to dish out USD10 billion in federal funds to struggling state governments as the property market slump hits property tax revenues, another USD10 billion to aid those facing foreclosure on their homes, plus an additional USD10 billion to extend unemployment benefits.

Sen. John Edwards, who trails Clinton and Obama in the Democrat running, has called for similar measures to help inject cash back into the economy, but even with a Democrat majority in Congress, such plans, which rely heavily on additional spending at a time when the budget is under pressure due to the cost of ongoing military operations in Iraq, would stand little chance of avoiding a presidential veto. They have attracted inevitable criticism from the Republican Party, which has accused the leading Democrat candidates of lacking substance on the economy.

In a scathing attack on Obama's proposal, Republican National Committee Communications Director Danny Diaz stated on the RNC website that the Illinois Senator's economic plans have already been "widely panned", and his new idea is "just more of the same" tax and spend.

"It's becoming clearer how Obama defines 'change': higher taxes and more government. His knee-jerk tax-and-spend proposals are what you expect from a life-long liberal; short-term senator," he remarked.

However, in an statement emailed to various news outlets, Obama argued that: "We can't wait for the next president to act."

He went on to claim that his plan would "jump-start the economy by putting money in the pockets of those who need it most and who will spend it quickly".

Earlier in the month, Bush confirmed speculation that the administration is considering a fresh round of tax cuts to help the economy, but the details of any such plans are unlikely to be known until he delivers his State of the Union address on 28th January.

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