Wednesday, October 15, 2008


Senator McCain's economic proposals centre on more help for homeowners who are facing foreclosure, and he has called for more tax cuts to help investors, retired people and workers.The new tax breaks would cost about $52bn.The new help to homeowners is much more expensive, costing around $300bn, although Senator McCain says it should be funded out of the $700bn bail-out package.

The key elements are:

  • US government to buy up distressed mortgages and refinance them at lower values, letting borrowers enjoy more affordable rates.
  • New lower Federal tax rate of 10% on the private pension income in 2009 and 2010
  • Expanded tax deduction for investment losses in 2008 and 2009 and a 50% increase in the capital gains allowance
  • Tax-free unemployment benefits for two years
  • People with share-based retirement accounts allowed to postpone withdrawals until markets improve

Senator McCain's plan would follow the $300bn housing rescue plan passed by Congress over the summer - but unlike that plan, which requires the banks to write-down the value of distressed mortgages first, he proposes that the federal government would absorb the losses from the sub-prime lending fiasco.Senator McCain has attacked the Obama plan for being too expensive and wasting taxpayers' money.His plan is also less targeted at job creation and helping the unemployed and more at preserving the value of assets, both stocks and home values.

Senator McCain believes the key to the long-term recovery of the economy is to keep taxes low, so he wants to retain all the tax cuts made by President Bush, and increase tax breaks for companies to encourage investment.

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