Bankruptcy

Treasury Secretary Has Good News; but Tax Increases to Come?

By Meaghan Olson

According to the Treasury Secretary, the United States? economy has pulled away from the edge of collapse.

Timothy Geithner made this evaluation after watching a week of positive economic indicators, according to CNN.com, and he believes the country can expect continued economic improvement for the rest of 2009.

Less Job Loss, More Jobs To Come?

Job losses should slow, and job creation could begin as early as 2010.

To bridge the gap between the end of the recession and the end of the recovery, Geithner says the government plans to extend unemployment benefits that are currently keeping millions of Americans out of poverty.

Some Economic Reality, Too

The news was not all good. Geithner acknowledged in an interview on ABC?s ?This Week? that due to the recent emergency measures that seemingly saved the economy, the same economy is now significantly vulnerable to expanding deficit levels.

?We will not get this economy back on track, recovery will not be strong and sustained, unless we?can convince the American people that we?re going to have the will to bring these deficits down once recovery is firmly established,? the Treasury Secretary said on CNN.

Tax Increases?

Geithner did not rule out future tax increases as one possible strategy to address the deficit issue.

He reported that the President?s administration was dedicated to fixing the problem, and would not take anything off the table.

The next day, during a briefing with the press corps, Press Secretary Robert Gibbs clarified, stating that the President had already ruled out any tax increases on the middle class (those making under $250,000 per year).

Some Republicans have begun to acknowledge some improvement, but are not eager to give Democratic policies credit.

Rep. Mike Pence (IN) says that progress has happened “in spite of the prescriptions of Washington”.

?I think what we?re seeing in the economy now is the inherent resilience of the American economy and the American people.

“This piecemeal approach?government handouts through a government bureaucracy?is no substitute for broad-based tax relief and fiscal discipline in Washington,? Pence told CNN.

Republican Sen. John McCain (AZ), who has spent more time opposing Obama than most of his colleagues, acknowledged that the $787 billion economic stimulus has had an effect, but voiced continued criticism that the cost was probably not worth the benefits in the long run.

?I think it?s very clear that the stimulus has had some effect,? McCain said. ?But we have put trillions of additional debt on future generations of Americans. The long-term consequences, I think, are going to be, unfortunately, devastating unless we do something about it.?

Successful Cash for Clunkers Program Running on Fumes

Another stimulus-based proposal, the so-called ?Cash for Clunkers? program that provides rebates to people trading in old cars for more fuel-efficient models, symbolizes the current debate.

The program, which was initially budgeted for $1 billion, has already exhausted its cash reserve, as car buyers flock to mostly American companies to trade in their vehicles.

Demand has exceeded supply, and now some Democrats want to extend the program, at a cost of $2 billion.

Some Republicans say the results aren?t clear enough to justify an additional expenditure.

Still, the program has lowered the miles-per-gallon rating of its participants? vehicles by nearly 10 miles on average and Ford Motor Company reported some of its best sales numbers in years after the program went into effect.

Source: CNN.com

Full post as published by The Bankruptcy Blog on August 05, 2009 (boomark / email).