Obama Campaigns against the Blazing Foreclosure Background and Wins

Posted in Foreclosed House, December 3rd, 2008 |

The foreclosure crisis was the blazing background against which Obama campaigned and won. But that has become history. Today he has to tackle the foreclosure problem and to do so the focus has to be on taxes He promised to lower taxes for the middle class but increase them for those with more than an annual earning of $250,000.

Philip M. Nichols a professor of legal studies and business ethics advises that Obama should be particular about his tax promises and use it as a lever to get the economy out of the foreclosure related mess. He explained, “The effect would be two-fold. It would increase the rate of spending by the middle class.” It would also increase the rate of saving by the middle class. This saving would serve as a capital to encourage economic growth.
Not all are of the same view. Professor Gerald Faulhaber questions the benefit of steep tax cuts that are permanent, considering the huge debt America has accumulated. The latter roughly equates to $1 trillion including new borrowing connected with the latest rescue package. Faulhaber advises that Obama should concentrate on short-term (six to twelve months) tax measures to give a kick to the economy.
Kent Smetters a professor of insurance and risk management advises that Obama should not compensate the tax breaks by raising taxes on corporations. He explained, “The problem is that United States already has one of the highest corporate tax rates in the world.” If that is further increased then it will hurt the productive functioning of the firms considering the recent increased costs. On top of this are regulatory instructions to comply with (2002 Sarbanes-Oxley Act) that will put great pressure on medium sized companies. Obama however has promised to make regulations more stringent – especially after the collapse of Lehman Brothers and other jumbo banks. While the economic pundits understand the political considerations behind Obama’s assurances they caution him to take into account the ground realities and facts. A gradual approach would be more sustainable. Faulhaber cautions, “Government could do a lot of harm if it gets involved in ways that aren’t perfect. He compares business regulation to the game of football in which the government has to take on the role of a referee to stop rampant violations but it should not itself become a player! Thus he says that the regulations should be for the time being concerned with a specific situation rather than broad and general.