What is Plan B if China Dumps its U.S. debt?

With the Chinese President's visit to the White House, some experts have begun wondering if government officials have a Plan B in case Beijing decides to dump its holdings of U.S. treasuries.

From Reuters.com:

China is officially the United States' biggest foreign creditor, with roughly $900 billion in Treasury holdings -- or over $1 trillion with Hong Kong's holdings included.

That means it could do severe damage to U.S. debt markets if it suddenly started selling large amounts.

Most experts say if there were signs of this happening, the U.S. government would go for a combination of persuading Americans to buy more U.S. debt, the same way they did in World War II, and finding friendly foreign governments to make additional purchases.

Banks could be called on to increase their holdings of treasuries, and as a last resort, the Federal Reserve could also be called on to fill the gap, though this could risk turning any dollar weakness into a slump.

"The U.S. government should have and maybe still could call on the people of the U.S. to invest in U.S. debt," said David Walker, a former U.S. comptroller general who heads an advocacy group calling on the government to curb the U.S. budget deficit and borrowings.

To be sure, the idea that China would suddenly sell its U.S. debt holdings is almost unimaginable to some.

After all, any weakening in the U.S. debt markets and the resulting global markets turmoil, including likely weakness in the dollar, would bounce back on China and could hurt its economy badly, especially as the United States is such a huge Chinese export market.

Continue reading at Reuters.com...

Economists Foretell of U.S. Decline, China's Ascension

According to many prominent economists, the short and long term outlook for the U.S. economy isn't looking good. Who do they think will become the next economic super power? China.

Reuters reports:

Leading thinkers in the dismal science speaking at an annual convention offered varying visions of U.S. economic decline, in the short, medium and long term. This year, the recovery may bog down as government stimulus measures dry up.

In the long run, the United States must face up to inevitably being overtaken by China as the world's largest economy. And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger.

On the one hand, Harvard's Martin Feldstein said he believes the outlook for U.S. economic growth in 2011 is less sanguine than many believe.

First, the boost to growth from government spending will be drying up this year, he said. Renewal of expiring tax cuts is no more than a decision not to raise taxes, and the impact of one-year payroll tax cut is likely modest, he said.

"There's really not much help coming from fiscal policy in the year ahead," he said. Woes from the dire situations of state and local governments may actually be a drag on growth, he said.

Read more here

10 Tax Friendly Cities for Small Business Owners

Although some experts suggest that the economy is improving, many small business owners are still struggling, while also nervous about the possibility of an across the board tax increase next year. Fortunately, there are some places in this country that offer significant incentives to small businesses. To help all of the entrepreneurs reading my blog, I have put together the following list of tax friendly cities for small business owners.

Anchorage, AK

Although Alaska may not be the ideal climate for everyone, it can be a great place to do business. Both the income and sales tax rates are zero, and property taxes are normal compared to other cities in the country. Another benefit of living in Anchorage is the dividend payments each resident receives from oil-drilling taxes.

Seattle, WA

Seattle may be one of the wettest cities in the country, but it is also one of the best to do business in. Seattle is also the home of some of the most innovative companies in the world, including Boeing, Microsoft, and Amazon. The state has no income tax, and Seattle is even planning to revise their already business-friendly tax code to encourage more small business owners to move to the city.

Cheyenne, WY

Cheyenne is known for how windy it is, but for business owners a little wind is worth the great tax laws. Cheyenne has one of the lowest property taxes in the country, no income tax, and a low local tax burden.

Eugene, OR

Oregon is infamous for their nonexistent sales tax, and low home prices. Additionally, there is also no retail business license fee in Eugene. Portland is just a couple of hours away, with plenty of great entertainment and dinning options.

Las Vegas, NV

The state of Nevada has the lowest overall tax rate in the country, with no income, estate, franchise corporate, or gift taxes. The city of Las Vegas has an even more favorable tax climate, with low property and sales tax rates. Although the city has been plagued by high foreclosure rates, businesses continue to thrive as tourists continue to pour in from around the world despite the economic downturn.

Des Moines, IA

The city of Des Moines, Iowa has been rated one of the most affordable places to do business in the country. Household incomes are on the rise, as well as employment rates. The cost of doing business in Des Moines is about 15% below the national average, making it the perfect place for a new business owner to set up shop.

Raleigh, NC

North Carolina has a few cities that have been rebounding well through the recession, but Raleigh outshines all of the other nearby cities. Business friendly tax rates, combined with a low cost of living, make the recovering city very appealing to business owners.

Sioux Falls, SD

Like many of the cities on my list Sioux Falls, South Dakota has continued to develop through the recession, attracting new residents and higher business revenue. The city strongly appeals to business owners because of the lack of a state income tax, and other local corporate tax incentives.

Fort Worth, TX

The city of Fort Worth, may be smaller than Dallas, but in many ways it is much better for business owners. They do not charge a license fee for businesses, and property taxes are extremely low. Forth Worth is also the birthplace of American Airlines, and boasts an unemployment rate that is 14 percent below the national average.

Manchester, NH

Manchester offers a very favorable tax structure for business owners and residents alike. Close enough to reap the tourism from Boston, but more affordable to live and run a business in, Manchester is the last tax friendly city on my list. With no income tax, no sales tax, and low property and auto taxes, Manchester is definitely a great city to open a small business in.

Dodging Repatriation Tax Lets Companies Bring Home Cash

Earlier in the month business executives reportedly asked President Obama for a new tax holiday. Apparently the executives have suggested the program would bring cash back to the U.S. economy.

From Bloomberg.com:

The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.

What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers -- including “the Killer B” and “the Deadly D.”

Merck & Co Inc., the second-largest drugmaker in the U.S., last year brought more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp., securities filings show. Merck is also appealing a federal judge’s 2009 finding that Schering-Plough owed taxes on $690 million it had earlier brought home from overseas tax-free.

The largest drugmaker, Pfizer Inc., imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimize the tax hit on its publicly reported profit.

Disclosures in Switzerland and Delaware by Eli Lilly & Co. show the Indianapolis-based pharmaceutical company carried out many of the steps for a tax-free importation of foreign cash after its roughly $6 billion purchase of ImClone Systems Inc. in 2008.

Read more here

Republicans and Democrats Spar Over Tax Cuts, Economy as Election Nears

From AdvisorOne.com:

As the hours dwindle down to the election on Tuesday, the talk Sunday was still about the economy and the two-sided coin of tax cuts and the deficit. On This Week with Christiane Amanpour, Sens. Robert Menendez, D-N.J., and John Cornyn, R-Texas, squared off about both.

Amanpour’s question to Menendez about whether this election would be “as bad as 1994” brought a resounding no. He stated that the Republican brand’s “image was much better [in 1994] than it is today,” and that Democrats are faring better than they did then. He added that the Democrats’ “goal is to have them understand and channel their anger on election day against the Republican Party that brought us to the verge of economic collapse in November of 2008, when financial institutions in this country were ready to collapse.”

Amanpour challenged him about that. “A recent Bloomberg poll found that most Americans think that taxes have gone up since President Obama took office;” she said, “that the economy has shrunk; that TARP, the corporate bailout, won't be mostly paid back. I mean, all of those are untrue. Why is the messaging so bad?”

Menendez replied that “I think the challenge is, when you're hurting economically—and we have gone from negative job growth to positive job growth, from negative GDP growth to positive GDP growth—but if you're still unemployed, none of that news makes that much difference to you.”

Cornyn agreed about the cause of voters’ reactions, but disagreed about the cause of the economic problems. Amanpour turned the conversation to the subject of taxes and asked him about Obama’s plan “to raise taxes on the wealthiest and preserve them for the middle class.” Cornyn replied, “I don't believe we ought to raise taxes on anyone during a fragile economic recovery. …”

Obama: End Tax Breaks to Stop Overseas Hiring

From Google News:

President Barack Obama is renewing his call for Congress to close tax breaks that reward some U.S. companies with overseas subsidiaries, a proposal that has raised concerns among some lawmakers in the president's own party.

In his weekly radio and online address, Obama said the tax breaks encourage companies to create jobs and profits in other countries.

"There is no reason why our tax code should actively reward them for creating jobs overseas," Obama said. "Instead, we should be using our tax dollars to reward companies that create jobs and businesses within our borders."

At issue is a bill that stalled in the Senate last month that would end some tax credits and deferrals for U.S. companies for operations overseas.

Though Obama singled out Republican opposition, the bill also failed to get support from some Democrats, including Senate Finance Committee Chairman Max Baucus, D-Mont., who expressed concern that change would put the U.S. at a competitive disadvantage.

The ending of the tax loopholes has been opposed by business groups, including the National Association of Manufacturers.

Obama said that while companies that conduct business internationally do make an important contribution to the U.S. economy, it doesn't make sense to grant them tax breaks when companies at home are struggling to rebound from the economic crisis.

What Happens When Cities Go Broke?

In a new article on Forbes.com, author Jonas Elmerraji examines the possibility of a city or municipalities filing for bankruptcy. It may seem strange, but just two years ago Vallejo, CA filed for bankruptcy. With the economy stalling, we may just see more cities looking toward bankruptcy to restructure debts and obtain more attractive financing.

Forbes.com reports:

In today's shaky economic environment, bankruptcy has become a dreaded--yet not all that uncommon--phenomenon. But what happens when it's not a person or company going broke, but an entire city? With added emphasis on government finances in 2010, it's a question that more and more citizens are beginning to ask themselves.

Municipal and state bonds are investments that touch a huge percentage of the investing public. And as we're seeing right now in Europe, there's no limit to the size to which government budget problems can grow.

Here's a look at what it means for a city--or a county or state--to go bankrupt, including the fallout for its citizens and stakeholders.

New Kid on the Block

Bankrupt cities are a relatively new phenomenon. Until the 1930s, it was legally impossible for U.S. cities to declare bankruptcy due to the absence of any municipal bankruptcy legislation. That changed in 1934 when the Bankruptcy Act was modified to include municipalities, a change made in response to the growing number of insolvent towns in the U.S. during the Great Depression.

After a number of evolutions and changes, the rule emerged as today's Chapter 9 of the U.S. Bankruptcy Code. Chapter 9 bankruptcies are available exclusively to municipalities. But there are some significant differences between a city's Chapter 9 bankruptcy and the much more common personal and business bankruptcies that take place on a daily basis.

Chapter 9 bankruptcies aren't designed to extinguish excessive debts. Instead, their purpose is to aid in reorganization by allowing a city to break untenable contracts and obtain more attractive financing. That's a good thing for a city's bond holders, who would typically see their assets at risk in a corporate bankruptcy.

Read more here

Five myths about TARP, according to Treasury Secretary Tim Geithner

The Troubled Asset Relief Program officially ended last week, and many Americans are wondering about how the money was spent. To clear up misunderstandings surrounding the program, Treasury Secretary has personally penned an article for the Washington Post on 5 common myths about TARP. You can find a segment of Geithner’s article below.

Born at the peak of the financial crisis in 2008, the Troubled Asset Relief Program expired last week, ending what was perhaps the most maligned yet most effective government program in recent memory. Despite new evidence about the low ultimate cost and positive impact of the TARP, there is still a chasm between the perceptions of the program and its overwhelmingly favorable effect on the U.S. economy.

The TARP was doomed to be unpopular from inception, because Americans were rightfully angry that the same firms that helped create the economic crisis got taxpayer support to keep their doors open. But the program was essential to averting a second Great Depression, stabilizing a collapsing financial system, protecting the savings of Americans and restoring the flow of credit that is the oxygen of the economy. And it helped achieve all that at a lower cost than anyone expected.

As we put the TARP to rest, let's also put to rest some of the myths about the TARP.

The TARP cost taxpayers hundreds of billions of dollars.

1. The true cost of the financial crisis will always be measured by the devastating losses of jobs, homes, businesses, retirement savings and fiscal revenues. But the cost of the TARP, which succeeded in reducing the overall economic damage, will be considerably lower than once feared. In fact, the direct budget cost of the program and our full investment in the insurer AIG is likely to come in well under $50 billion -- $300 billion less than estimated by the Congressional Budget Office last year. And taxpayers are likely to receive an impressive return (totaling tens of billions) on the investments made under the TARP outside the housing market.

Continue reading at Washington Post.com…

What Banks Say About The Economy

Although the economy continues to struggle, and unemployment numbers continue to increase, financial institutions are showing profits. This suggests the worst of the credit crisis is over, as many banks are charging less to cover bad loan losses. Read more from CNNMoney.com.

As the economy goes, so goes the financial sector, which explains why bank shares have taken a hit ever since fears of another slowdown emerged. But you can't just look at stock prices. You have to weigh the performance of the underlying businesses. When you do, you may be in for a bit of a surprise.

With unemployment about as high as it's been in 30 years and the nastiest real estate bust in almost a century still playing out, you'd think that big banks would be having a rough time making money, right?

Actually, they're pretty much printing profits. The big four -- Wells Fargo, Bank of America, Citi-group, and J.P. Morgan Chase -- collectively earned almost $14 billion in the second quarter.

The good news: Fewer deadbeat borrowers

This is a reflection that banks are having to charge off less to cover bad loans, which suggests the worst of the credit mess is really behind us. Wells recently trimmed its loan-loss reserves by $500 million, which went straight to its bottom line. Over the next few years, it could release as much as $11 billion more.

Another plus for banks: Funding costs are incredibly low right now. While you may be frustrated with the paltry interest rates you're getting on your CDs, these low rates are manna from heaven for banks.

Continue reading at CNN.com…

Black Friday 2010: Buy American

As our economy continues to struggle, many Americans are looking for ways to help. According to WalletPop.com, one of the best ways consumers can help with economic recovery is to ensure items you buy are made in the country. Especially as we get closer to the Black Friday holiday, where many taxpayers do most of their holiday shopping. Check out the following article from WalletPop.com.

It's the rare story about retailing that doesn't garner reader comments about where the products are made. It's also the rare retailer that makes the effort to stock only American made goods. Deborah Leydig is one of those retailers. Her Barrington, Ill. business stocks exclusively products made in this country, something that has become increasingly difficult to do.

"Deborah Leydig is in search of a can opener manufactured in the U.S.," opens a story in the Chicago Tribune. "The artist-turned-merchant had been stocking the iconic Swing-A-Way can opener, but had to stop this year when production moved overseas."

For decades, American companies have been outsourcing labor and relying on foreign production to stabilize businesses at home. Over time, it incurs cost to the environment, negatively affects our employment rates, and discredits our claims of sustainability. In a utilitarian sense, trade and commerce with other economies are of course necessary, but, is it healthy for us to rely on foreign systems? Especially when we are so proud of being self-reliant.

Leydig is just one example of a well-intentioned business owner trying to save jobs in the U.S., and she is not alone. Conscious consumerism is on the rise. Americans are buying environment-friendly goods, fair-trade products, and locally grown or made food at increasing rates.

Continue reading at WalletPop.com…

IMF Revises U.S. Growth Down, Jobs Picture Bleak

From Reuters.com:

U.S. economic growth will be much weaker this year and in 2011 than previously thought and that dims hopes for bringing down a very high unemployment rate anytime soon, the International Monetary Fund said on Wednesday.

In a sober assessment of the U.S. outlook, the IMF pulled down its estimate for 2010 growth to 2.6 percent from the 3.3 percent it published in July and said gross domestic product or GDP will expand 2.3 percent in 2011 instead of 2.9 percent.

"The most likely prospect for the U.S. economy is for a continued but slow recovery, with growth far weaker than in previous recoveries, considering the depth of the recession," the IMF said in its World Economic Outlook published ahead of weekend semi-annual meetings of it and the World Bank.

The IMF said the main reason the U.S. recovery is so weak is that consumer spending is sluggish and suggests it is little wonder that is the case. Falling home prices have reduced household wealth, 9.6 percent of the workforce is unemployed, banks won't lend and people are scared into saving.

It says the gap between actual and potential economic output will be a lingering drag on the pace of recovery.

A Tax Cut Both Parties Should Love -- But Don't

Tax cuts and rebate checks to stimulate the economy have been discussed frequently in the media. However, some economists are now suggesting that a payroll tax holiday would be more effective. Even the nonpartisan Congressional Budget Office agrees that a payroll tax holiday would be more likely to increase consumer spending.

CNNMoney.com reports

The payroll tax is the amount paid by both employers and employees to fund Social Security. Each pay 6.2% of a worker's salary, up to the first $106,800 of income.

Because of that limit, the tax is one of the most regressive in place today, hitting the working poor and middle class much harder than the wealthy.

The nonpartisan Congressional Budget Office estimated earlier this year that eliminating payroll taxes was roughly two to four times more effective in spurring economic activity than a reduction in income taxes, the policy option that's getting most of the attention in Congress.

"This is a better tax cut than a general income tax cut," said Roberton Williams, senior fellow with the Tax Policy Center. He said getting more money to workers who earn less increases the chance that it will be spent rather than saved, a concept popular among Democrats.

Read more here

More Families, Friends Move In Together

From 2005 to 2009, American families took about 3.8 million extended family members in to their home to live with them. Due to financial strain, more and more households now have multiple siblings or family members living under one roof. New census data found that extended relatives now make up 8.2% of family households, up from 6.9% in 2005.

USA Today reports

Fueled by the dismal economy and high unemployment, more Americans — friends and families — are doubling up.

From 2005 to 2009, family households added about 3.8 million extended family members, from adult siblings and in-laws to cousins and nephews. Extended family members now make up 8.2% of family households, up from 6.9% in 2005, according to Census data out this week.

"Clearly, a big part of that is the economic recession and housing costs," says Stephanie Coontz, co-chair of the Council on Contemporary Families, a non-profit research association. "We're seeing a shift away from the 1950s and 1960s mentality against extended families," when "modern" women did not take in aging parents for fear of hurting their marriage.

There are also signs of a shift from family households. For the first time in more than a century, more than half of people aged 25 to 34 have never been married.

The number of people in non-family households — those whose members are not related — grew 4.4% from 2005 to 2009, faster than the 3.4% growth for family households.

"It's a realistic recognition that while a good, healthy nuclear family is a valuable thing to have, it's not the only family form people are going to live in all their lives," Coontz says.

Read more here

40 States Bank on Rising Tax Revenue In 2011

According to a new study 40 out of 50 states in the U.S. are anticipating a rise in tax revenue next year. Corina L. Eckl, author of the report and director of the fiscal affairs program at the NCSL, claims that 2011 will be the turning point for many local economies.

The Associated Press reports:

The vast majority of state governments are anticipating a rise in tax revenues this year after two years of sharp drops. Analysts caution that most states will face large budget gaps in the next few years.

Forty states forecast having an increase in tax receipts in the current fiscal year, according to a forthcoming report by the National Conference of State Legislatures. Slow economic growth is boosting proceeds from income and sales taxes.

That could reduce the impact of states' budget struggles on the economy. State budget shortfalls have led to widespread layoffs, tax increases, spending cuts and other measures that have restrained economic growth.

"We do think 2010 is the bottom and we are at a turning point," said Corina L. Eckl, director of the fiscal affairs program at the NCSL and author of the report.

Still, state officials aren't without enormous challenges. States will lose federal stimulus money in coming years and will struggle to close large budget gaps. Tax revenues are well below pre-recession level. High unemployment puts heavy demand on state-run social service programs.

Continue reading at Google.com…

Postal Service Fine Without Taxpayers

As the US Postal Service continues to struggle with revenue problems, many taxpayers have become worried about the possibility of another huge bailout effort. However, according to the Washington Times representatives from the USPS have no desire to request a taxpayer-funded bailout.

It's election time in an era of polarization, but that doesn't excuse misleading the public with claims that the U.S. Postal Service seeks a taxpayer bailout ("Time for another government bailout," Commentary, Sept. 21). Nor does it excuse congressional interference with bargaining between the Postal Service and its unions. Unfortunately, the article by Rep. Darryl Issa fails on both counts.

The Postal Service doesn't seek a taxpayer bailout. It proposes to use a surplus in its pension account within the Civil Service Retirement System (paid for by postage rate payers and postal employees - its own funds, not taxpayer funds) to cover the cost of future retiree health benefits. Congress imposed the cost of pre-funding these future retiree health benefits - $5.6 billion per year - on the USPS in 2007. This requirement, which no other agency or business in America faces, is the major cause of the recent financial crisis at the USPS, not the Internet or the recession. Without the pre-funding requirement, the USPS would have been profitable two of the past three years.

The USPS also has plenty of flexibility to downsize - it has cut more than 100,000 jobs since the recession began in late 2007. The no-layoff contractual clause the congressman criticizes covers only workers with more than six years of service - leaving some 160,000 career and noncareer employees subject to layoffs.

Sadly, these problems are worsened by congressional inaction on resolving the unfair pre-funding burdens on the Postal Service. Yet Mr. Issa proudly vows to block legislation to address the situation.

Politicizing one of America's great institutions by getting Congress involved in the collective bargaining process is the last thing we should do. The Postal Service has not received a dime of taxpayer support in more than 25 years and offers the best, most affordable service in the world.

Warren Buffett: "We're Still In a Recession"

Despite a study earlier in the week asserting the recession has ended, famed investor Warren Buffet claims that we are still in a recession. He admits that the economy will recover eventually but that it is going to take a few more years.

MSN reports

On Monday, the National Bureau of Economic Research said the world's largest economy ended an 18-month recession in June 2009, but cautioned that its assessment did not mean normal activity had resumed.

Buffett said he defines a recession differently from the NBER, saying it ends when real per capita gross domestic product returns to its pre-downturn level.

President Barack Obama said on Monday that economic weakness is "still very real" for the millions of Americans who are out of work, have seen the value of their homes fall, or are mired in debt.

Buffett, 80, runs Berkshire Hathaway Inc, which has roughly 80 operating businesses. "A great majority" of these businesses are "coming back slowly," he said.

Berkshire's operations cover a broad swath of the economy, including the Burlington Northern Santa Fe railroad, Dairy Queen ice cream, Geico auto insurance, and luxury jewelers such as Borsheim's.

Shipments at Burlington Northern are "61 percent of the way back," Buffett said. "Our carpet business, our brick business, our insulation business, they're not back 61 percent, but they are moving back."

Read more here

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Analyst Who Called Recession End Sees Durable Rebound

Economist Thomas Lam accurately predicted the official end of the recession a year and a half ago, and now he is offering his opinion on economic recovery. He predicts that we will see the economy rebound, with less than a 20% chance of a renewed slump.

Bloomberg.com reports:

“The main risk to the U.S. economy today is really a prolonged period of mild growth rather than an imminent recession,” said Lam, the Singapore-based chief economist at OSK-DMG, a joint venture between Malaysian securities firm OSK Holdings Bhd. and Frankfurt-based Deutsche Bank AG.

Lam’s May 2009 call that the U.S. would emerge from recession the following month -- confirmed this week by the National Bureau of Economic Research -- drew “quite a bit of heat because it was a time when things were still uncertain,” the 35-year-old analyst said in a telephone interview with Bloomberg News today. “Some thought the call too optimistic.”

Lam, who published his prediction while working for his previous employer, United Overseas Bank Ltd., studied peaks in the number of U.S. jobless claims using a proprietary weighted- average formula to remove statistical “noise,” and found a correlation with economic turning points.

“The model actually predicted it would be 394 weeks from the prior trough in November 2001” before the economy would begin growing again, Lam said. “It was actually 395 weeks.”

Read more here

The Details of Obama's $50 Billion Infrastructure Plan

Over Labor Day weekend, President Obama announced his plan for a new infrastructure reform plan. It is expected to cost around $50 billion and with the economy continuing to struggle Obama has pitched the proposal as a job creation package. However, many experts have suggested that it might have the opposite effect. The full contents of the plan have not yet been released. However, based on the information currently available, I have put together the following article so we may all become familiar with the President’s new stimulus plan.

Obama's Announcement

At “Laborfest” in Milwaukee the President Obama first announced his proposal for the $50 billion infrastructure plan. He specifically called the plan a "permanent policy change" rather than a quick fix for a big problem.

“We used to have the best infrastructure in the world and we can have it again,” Obama announced. “We want to change the way Washington spends your tax dollars; we want to reform the way we fund and maintain our infrastructure to focus less on wasteful earmarks and outdated formulas, and we want competition and innovation that gives us the best bang for the buck."

Roads, Railroads and Job Creation

The main idea behind this infrastructure plan is to do what its name implies: build and repair infrastructure. Obama’s plan aims to build 150,000 miles of new road, 4,000 miles of railroad, and 150 miles of runway. It would also work on establishing a next generation air traffic control system. Director of Transportation of America, James Corless, has come out in strong support of the plan. He said the American Society of Civil Engineers regularly gives our country's infrastructure "grades that parents would punish their children for bringing home."

Although many members of Congress agree that our infrastructure needs improvement, many disagree with the President’s new proposal. John Mica, the ranking Republican on the House Transportation and Infrastructure Committee, has already spoken out against Obama’s plan. He asserts that nearly two-thirds of the money allocated for infrastructure projects in the American Recovery and Reinvestment Act of 2009 have still not yet been spent. Mica has suggested working with the White House on a plan to use this money, and also warns that members of Congress are likely to be dubious about a massive spending bill this close to the November elections.

Job Creation

The main selling point of Obama’s proposal is the jobs it would create. However, economists are unsure about the number of new jobs the plan would actually generate. Goldman Sachs economist Jan Hatzius has claimed the proposal "could be helpful,” but is “unlikely to have a large effect on growth." The White House itself has even admitted that the plan would do little to create any jobs until later in 2011. There are also concerns that some tax changes to fund the bill would have a negative affect on the unemployment problem in the country.

Funding Options

Although it will be Congresses job to decide how to fund the legislation, President Obama has suggested closing tax loopholes to pay for the proposal. Specifically, they would like to eliminate the manufacturing tax deduction, and the depletion allowance for oil and gas companies. It is unclear at this point if these proposed changes would cover the full cost of the legislation or not.

Effect on Businesses

While the plan pushes job creation, some opponents believe it could negatively affect businesses, and cause additional job losses. Economists worry that closing certain business tax loopholes could lower revenue, and force some businesses to cut back on expenses, or lay off workers. However, supporters of Obama’s plan explain that highway spending is scheduled to decrease by 5% in the next year, and the infrastructure proposal would both save, and create thousands of construction jobs.

National Infrastructure Bank

As Obama announced, his plan aims to reform the way the federal government handles infrastructure projects. As such, he has proposed creating the National Infrastructure Bank to manage the new infrastructure spending. The new federally regulated bank would evaluate potential infrastructure projects, and decide which are the most significant and useful to our country and economy. Unfortunately, taxpayers have been very weary of banks and financial institutions since the bailouts of 2008 and this is likely going to be the most difficult part to sell to the American public.

‘Great Recession’ Over, Research Group Says

If you have not heard yet, according to the National Bureau of Economic Research (NBER), the great recession is officially over. This news may come as a surprise to the millions of Americans that are still struggling financially. Check out the following story from MSNBC.com on this new announcement.

NBER said Monday that the recession which began in December 2007 ended in June 2009, which marked the beginning of an expansion. The announcement rules out the possibility of a so-called “double-dip” recession, because any new downturn would be seen as a brand new recession.

President Barack Obama said that even though the NBER officially named an end to the recession, the economy has a long way to go and much work to be done to become healthy again. "Something that took ten years to create is going to take a little more time to solve," Obama said at a town-hall-style meeting shown live on CNBC.

The NBER said it chose the June 2009 date based on examination of data including gross domestic product, employment and personal income.

"The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months," the NBER added in a press release on its website.

Continue reading at MSNBC.com…