Fixing the Economy - Page 3 of 3

Fixing the Economy

capitalistic affair. “The more our economy becomes part of the rising global economy,” says Jaynes “the more necessary it will be to have government involvement in the marketplace.” That’s no easy task; Jaynes foresees an intense political power struggle over government’s new role.

No doubt 2009 will also see heated arguments over how the White House uses tax relief to boost the economy.  Our economists certainly disagreed on the issue. In his plan, Obama seeks to give back between $500 and $1,000 to individuals and families, respectively. Boston likes the proposed Obama tax cuts and rebates. What he doesn’t like are the tax breaks that reward businesses for hiring new workers.  “I see the potential for that to be abused,” says Boston. “If you’re trying to stimulate the economy, you don’t want to pay corporations to do what they were going to do anyway.” Instead, Boston says, business should be awarded tax credits for making investments in new equipment and the like.

Not everyone sees the benefit of tax rebates to families. “I would not be supportive of a tax rebate, because we know what happened before,” Wright said, alluding to Bush’s 2001 tax rebates, which are widely seen as having no real stimulative effect on the economy. “Government should actually spend money the old-fashioned way: on infrastructure, putting people to work. That gets money back to the households. If they start to restore their ability to pay their bills, credit improves, they’re feeling more comfortable, and they can spend more in the larger economy.”

Gordon Nembhard proposes that government might thaw the nation’s frozen credit situation by looking to small community banks and credit unions. Out of necessity (and common sense), those smaller lenders maintained high screening standards on borrowers and stayed away from issuing subprime and other risky loans. As a result, says Gordon Nembhard, many of them “are actually still flush with capital. They have very low delinquency rates. They do very small lending to local people that they know–small business, small activities.”

When it comes to tax give-backs, Jaynes fears they may be inadequate. “That’s the weakest part of the plan for me,” he says. “I’d rather see that money going to states and cities to create jobs. A tax cut will not be big enough for this problem. This is not an ordinary little recession where you can get away with a tax cut that throws $1,000 into households–which they might be able to go out and spend.” No surprise there. Economists are rarely of the same mind when it comes to anything. That should only reinforce the importance of the one thing all of our economists agree the economy needs: jobs.