The main new proposals would:
– for the next two years, give businesses a $3,000 income-tax credit for each new full-time employee they hire above the number in their current workforce;
– allow savers with tax-favored Individual Retirement Accounts and 401(k)’s to withdraw 15 percent of those retirement savings, up to a maximum of $10,000, without paying a tax penalty as the law currently requires for withdrawals before age 59 and a half;
– bar financial institutions that take advantage of the Treasury’s rescue plan from foreclosing on the mortgages of any homeowners who are making “good-faith efforts” to make payments;
– direct the Treasury and the Federal Reserve to create a temporary facility for loans to state and local governments, similar to the Fed’s new arrangement to loan corporations money by buying their commercial paper, which are the I.O.U.s that help businesses with daily operating expenses like payrolls.
Here is the article. I doubt if the substitution effect generated by #1 is large. I fear the precedent set by #2 and I don’t understand the enforceability of #3. Savings withdrawals are in effect a form of fiscal policy and I don’t yet see how fiscal policy is supposed to cure us of our current mess, which is rooted in coordination problems. Let’s hope #4 does not become necessary. Of course it is before an election and each candidate has to propose doing something in addition to the status quo. But a lot will happen between now and 1/20; fortunately these proposals won’t be taken very seriously.
Here are McCain’s proposals, I may discuss them soon.