Thursday, January 17, 2008

The Stimulus Plan

As economists claim the US is headed for recession, Congressmen in Washington argue about the proper role of government in preventing it. Democrats offer a plan to put money in middle and low income earners hands to boost consumer spending temporarily. Republicans want to make Bush's high income earners tax cuts permanent. The usually conservative leaning Federal Reserve seems to side with Democrats in this instance. I should point out that by keeping Bush's tax cuts, the US budget deficit would likely worsen - meaning more Treasury Bonds with higher interest rates leading to higher interest rates overall that will hurt consumers and homeowners and only worsen the future economy. Why do these supply-siders insist on their nonsense when even the Fed recognizes the weakness is on the demand side?

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