In a speech today in Toledo, Ohio that his campaign billed as a major new policy address, Senator Barack Obama unveiled a new “rescue plan” for the middle class. Though much of what the Illinois Senator talked about was a recasting of older proposals, there were some new ideas aimed at getting the economy going again.
The idea, says top economic advisor Jason Furman, is to put the focus on a bunch of proposals that rely on authority the government already has—in other words, that wouldn’t require new legislation to be put in place. “They are all immediate things we could do right away,” he told reporters on a conference call. “Senator Obama wants these things to be done as quickly as possible.”
Here’s a look at the key new ideas Obama proposed, taken from a fact sheet his campaign issued before his speech:
1. JOB CREATION: A New American Jobs Tax Credit. Obama is calling for a temporary tax credit for firms that create new jobs in the United States over the next two years.
Furman adds that he would give companies a $3,000 tax credit this year and next for every net new job they create.
2. RELIEF TO FAMILIES: Penalty-Free Withdrawals from IRAs and 401(k)s in 2008 and 2009. Obama is calling for new legislation to allow families to withdraw 15% of their retirement savings – up to a maximum of $10,000 – without facing a tax-penalty this year (including retroactively) and next year.
The idea here, says Furman, is "to give families the flexibility to help them through the hard times." If they need to tap into their retirement saving now to pay off their bills, they shouldn't face a tax penalty for doing so.
3. RELIEF TO HOMEOWNERS: 90-day foreclosure moratorium for homeowners that are acting in good faith. Financial institutions that participate in the Treasury’s financial rescue plan should be required to adhere to a homeowners code of conduct, including a 90-day foreclosure moratorium for any homeowners living in their homes that are making good-faith efforts to pay their mortgages.
This seems on its face pretty straightforward: any financial institution that accepts the government's aid by selling assets or accepting a capital injection would also have to agree to freeze mortgage foreclosures for 90 days to give homeowners time to work out a way to keep them in their homes. That could help in cases where the institutions still hold a homeowner's loan intact, but it's not clear how it would work in cases where the mortgage has been sliced into the tranches that have gone into securities.
4. RESPONDING TO THE FINANCIAL CRISIS: A Lending Facility to Address the Credit Crisis for States and Localities. Obama is calling on the Federal Reserve and the Treasury to work to establish a facility to lend to state and municipal governments, similar to the steps the Fed recently took to provide liquidity to the commercial paper market.
Furman points out that states like California, along with many municipalities, are having trouble getting the short-term financing they need to make payroll or meet other expenses, even though they can count on tax revenues coming in. So Obama proposed that the government take steps to issue short-term paper that would get them through the crisis, until the markets again function normally.
Those are the big ideas he outlined today. And according to the campaign statement, a few other things will go into the pot as well. Here's the rest of the list of proposals:
Obama’s plan also calls for temporarily eliminating taxes on unemployment insurance benefits; keeping all options on the table to help our automakers weather the financial crisis; having the Fed and Treasury prepare for guaranteeing a broader range of liabilities of the banking system; and instructing Treasury to help unfreeze markets for individual mortgages, student loans, car loans, loans for multi-family dwellings and credit card loans.
Senator John McCain also gave a speech focused on the economy today. Over the weekend, some supporters hinted that he may be coming out with new proposals, too, including further capital-gains tax cuts. But McCain didn't release any new proposals. His top economic advisor, Doug Holtz-Eakin, now says that McCain will offer up some more specifics when he speaks tomorrow. Stay tuned.