Parties discuss recession plans

Democrats and Republicans are wrangling over solutions for the current recession, and each party has its own ideas. \nRepublicans are concentrating on unemployment benefits and trying to encourage business investment and expansion with funds. Democrats are focusing on homeland security, aid and health benefits for the newly unemployed. \nMembers of both parties agree on a temporary reduction in taxes for new business investment by allowing faster first year write-offs for new equipment that would strongly encourage businesses to expand investments. Also, a tax rebate for low-income workers, and special benefits for the workers who recently lost their jobs. \nHeejoon Kang, professor of business economics and public policy, said, "Both of the stimulus plans will work and are necessary for the current situation." \nThe plans differ on how much emphasis and additional planning will be made on already approved agendas. Democrats heavily emphasize the extended unemployment and health care benefits for workers who lost their jobs because of the recession. \nAlthough the parties agree the stimulus package should consider both the unemployment caused by the recession and the Sept. 11 terrorist attacks, the amount that they want to share is different. \nAccording to Joseph Guinto from Investor's Business Daily, Republicans want to share $10 billion for increased unemployment benefits and Democrats want to share more than $20 billion to increase unemployment aid. \n"The difference is how it would work," Kang said. "For example, the Democrat's ideas sound more likely to directly encourage consumer spending, which is a very short term perspective." Because the money is more directly supplied to workers who lost their jobs or whose bonuses are not as big as the year before, it can be used for necessity products to compensate lost or reduced incomes.\n"The Republican's idea will more likely encourage investment in business sectors, and it is a comparably more long-term strategy than the Democrats'," added Kang. \nIn a CNN report last week, President George W. Bush said, "In the long run, the right answer to unemployment is to create more jobs." Republicans argue that improvement in business will eventually create more jobs than the Democrats' temporary consolation for the workers. \nAccording to Investor's Business Daily, Glen Hubbard, chairman of the White House's Council of Economic Advisers, said Bush's proposed stimulus plan would boost Gross Domestic Product by 0.5 percent and create about 300,000 additional jobs within 2002. \nBut many experts agree that Bush's stimulus plan could be very stressful for states if the economy continues to deteriorate. In the Nov. 26 Businessweek, correspondent Howard Gleckman said, "States may be looking at a shortfall this fiscal year of up to $50 billion." \nBecause of the weak economy, state level tax revenues are lower than expected. Stricter security and anti-terror programs are causing states to experience vast pressure over budgeting. Since states have responsibility to balance their budgets, they are likely to increase state-level taxes that will nullify Federal-level tax cuts. Two weeks ago, Indiana proposed an urgent need to increase sales tax and income tax. \nAnother obstacle comes from consumer fear about the war in Afghanistan. People are much less likely to make decisions on big spending even though they have additional spending money from tax cuts. And current tax cut stimulus plans might not show immediate support unless there are significant signs of improvement in the business environment. \nPeggy Hite, professor of accounting, said, "the responses to any policy that initiated by government are likely to be less elastic (tedious) than the theory predicts because of the security issue that we are experiencing now. Henceforth, the recovery can be slower than expected"