Following Barack Obama’s proposals announced earlier, Republican candidate John McCain has outlined the steps he would take as president to help spur the economy in the United States.
1. Eliminate taxes on unemployment benefits. Like the Democratic candidate, McCain suggests eliminating taxes on unemployment insurance to make sure that those individuals out of work have a better chance of paying their rent, mortgage, or other necessities each month. He stops short of extending benefits over a longer period of time.
2. Cut the capital gains tax to 7.5% for two years. This will inspire more investment in businesses, which in theory “trickles down” to the rest of the economy. McCain would also reduce the tax rates on IRA and 401(k) withdrawals (up to $50,000) to 10%, the lowest tier.
3. The government should only buy shares in private banks until they are sound. McCain isn’t happy about the plan to partially nationalize private institutions, but he seems to agree that Bush’s plan is solid in the immediate term.
4. The Treasury Department should guarantee 100% of all savings for six months. The FDIC recently increased the insurance limits on deposits to $250,000 from $100,000, which means more of your money is “safe” in banks. I don’t know many individuals who keep this much money earning miniscule interest rates in savings.
The original increase to $250,000 was a move that would help small banks attract deposits of large corporations that spread enormous amounts of cash across many institutions. McCain’s plan to insure without limit eliminates the need for large corporations to spread their cash around to smaller banks. This might result in more money being concentrated in a smaller number of banks.
I don’t think that this side effect outweighs the psychological benefit that might be presented with the idea that you can “entrust” banks and the FDIC with more of your money.
The price tag on John McCain’s outlined plan in $52.5 billion. What do you think of McCain’s ideas?