The weakening U.S. economy seems to be heading into a recession. It is time for Congress and the Federal Reserve to take five steps to put money back into the pockets of embattled consumers and revive business confidence:
• Temporary increases in employment insurance benefits. Since by definition such funds go to workers who have lost their jobs, the cash is likely to be spent quickly and thus perk up business.
• Swift approval of legislation already passed by the House to modernize unemployment insurance systems so more female, low-income and part-time workers can qualify for benefits if they lose their jobs through no fault of their own.
• Increased business investment incentives, such as accelerated depreciation or investment tax credits. Business investment not only creates jobs, it builds a stronger and more competitive economy in the long run. While the stock market may capture the public’s attention, retained earnings are actually the largest source of business investment capital. Putting profits to work by helping business create new jobs is a far more effective way to revive the economy than cutting taxes on wealthy Americans.
• Take steps to control the subprime mortgage crisis, as recommended by Sen. Hillary Clinton and others.
When Clinton outlined such a plan on “Meet the Press” on Sunday, host Tim Russert asked whether borrowers who agreed to low “teaser” rates on variable rate mortgages shouldn’t have to live with their decisions.
The answer is: “Not if it destabilizes the housing industry and plunges the economy into recession.”
• The Federal Reserve system should cut its key federal funds target rate by another half a percentage point later this month. As respected investment analyst Bob Doll notes, there is little or no risk such a cut would reignite core inflation, given the weakness of the economy.
Putting money back in the hands of workers who have lost their jobs coupled with incentives to business investment and lower interest rates will put America back to work. Congress and the Federal Reserve should waste no time enacting this five-part stimulus package.
