Companies Versus President Obama"s Economic Stimulus
The current economic crisis has stirred up much controversy amongst businesses in the US.
Some companies feel that President Obama's Stimulus proposal will jeopardize their future and thus only lead to further economic problems on top of the mess we're currently in to begin with.
The biggest topics of these controversies are Emissions, Health Care, Foreign Tax, Income Tax, Drilling, and Farm Subsidies.
There are many factors to be considered surrounding these topics, but if there is one thing these companies and President Obama can agree on, it is that something must be done.
To start, Obama is enacting a "cap and trade" system on certain companies to cut emissions that are believed to be contributing to global warming.
It is estimated that enacting this system will require companies to pay up to $646 billion in the next eight years to buy tradable rights (permits) to emit these pollutants.
Companies are not against the concept of these permits, but are more concerned in the sense that selling all these permits right away could bring a huge burden to the companies that are both selling and buying, resulting in an even farther economic downturn.
Another topic is that of health care.
In his stimulus, Obama provided $634 billion to help pay for health care reforms for the next ten years.
Half of that amount provided, is being funded by tax hikes, as well as medicare payment cuts to insurance companies, drug companies, and hospitals.
The companies involved in health care think this will have a number of effects.
For one, some insurance companies feel competing with rival government-backed insurance companies will hurt their profits, and in turn, will result in an increase in job unemployment.
Also, hospitals and drug companies fear their costs to consumers will decrease, and thus have the same effect as that of more job unemployment due to the cuts they will receive in their revenues.
Foreign Tax is another issue.
Multinational companies can currently defer U.
S.
taxes on their generated revenues abroad until the funds are brought back into the U.
S.
Obama presented this in an attempt to bring more jobs back to the U.
S.
as well as earn up to $210 billion by abolishing the tax deferral boundary.
The argument multinational companies make is that they will be at a competitive disadvantage against their rivals if they are paying U.
S.
taxes and their rivals are only paying low local taxes.
They also stated that if they begin to lose revenues the first jobs hit will be U.
S.
jobs, not foreign jobs, which will have a worsening affect on the economy.
Obama is also enacting a raise in Income Taxes in order to fund more money to the economy.
Families tax rates who earn more than $250,000 will jump from 33% to 36% and those who earn more than $370,000 will go to 39.
6%.
Dividends and capital gains will also go from 15% to 20%.
Finally, tax deductions for mortgage interest and charitable giving will drop to 28%.
Companies fear that by reducing annual net earnings of consumers, it will have a crippling affect to companies trying to keep investors in the market (home builders, mortgage brokers, etc.
).
Relating to the emissions pollution example as stated previously, drilling for oil will also become a problem for oil companies.
Obama is very focused on diminishing pollution, due to the ever growing environmental problems we are beginning to see.
The government is determined to convert the economy to a cleaner energy resource, which is a threat to oil companies.
If cleaner energy resources are developed, it will be easier for Obama to tax oil companies drilling off the coast of the U.
S.
, since there won't be such a dire need for oil.
The oil industry's argument that they plan to relay strongly is that the taxing could jeopardize jobs and energy security.
They also stated that by making drilling more expensive off the U.
S.
coast could encourage more oil companies to move their business abroad.
Lastly, agricultural subsidies have also become a topic of argumentation.
President Obama feels there are too many wasteful agricultural subsidies in the market.
He plans to cut this down by capping payments to farmers whose gross annual incomes do not exceed $500,000.
The cap will stand at $250,000, which he projects will save $9.
8 billion in ten years.
Agricultural lobbyists argue that farmers will not be able to stay in business due to our current economic situation and with such a low cap on payments.
They contest that farmers need the crops to stay in business, that Obama contests, are wasteful farm subsidies.
To conclude, Obama's economic stimulus seems to have its own pros and cons to everyone.
Unfortunately, in order to rid ourselves of this current economic situation, risks must be taken.
There is no way to predict ahead of time if the stimulus will prove to be a success in the future or if it will cause more problems for the economy that companies argue will; that is the nature of the of the situation.
We do know however that something must be done, and no matter the terms of the stimulus, there will always be dispute over it.
Some companies feel that President Obama's Stimulus proposal will jeopardize their future and thus only lead to further economic problems on top of the mess we're currently in to begin with.
The biggest topics of these controversies are Emissions, Health Care, Foreign Tax, Income Tax, Drilling, and Farm Subsidies.
There are many factors to be considered surrounding these topics, but if there is one thing these companies and President Obama can agree on, it is that something must be done.
To start, Obama is enacting a "cap and trade" system on certain companies to cut emissions that are believed to be contributing to global warming.
It is estimated that enacting this system will require companies to pay up to $646 billion in the next eight years to buy tradable rights (permits) to emit these pollutants.
Companies are not against the concept of these permits, but are more concerned in the sense that selling all these permits right away could bring a huge burden to the companies that are both selling and buying, resulting in an even farther economic downturn.
Another topic is that of health care.
In his stimulus, Obama provided $634 billion to help pay for health care reforms for the next ten years.
Half of that amount provided, is being funded by tax hikes, as well as medicare payment cuts to insurance companies, drug companies, and hospitals.
The companies involved in health care think this will have a number of effects.
For one, some insurance companies feel competing with rival government-backed insurance companies will hurt their profits, and in turn, will result in an increase in job unemployment.
Also, hospitals and drug companies fear their costs to consumers will decrease, and thus have the same effect as that of more job unemployment due to the cuts they will receive in their revenues.
Foreign Tax is another issue.
Multinational companies can currently defer U.
S.
taxes on their generated revenues abroad until the funds are brought back into the U.
S.
Obama presented this in an attempt to bring more jobs back to the U.
S.
as well as earn up to $210 billion by abolishing the tax deferral boundary.
The argument multinational companies make is that they will be at a competitive disadvantage against their rivals if they are paying U.
S.
taxes and their rivals are only paying low local taxes.
They also stated that if they begin to lose revenues the first jobs hit will be U.
S.
jobs, not foreign jobs, which will have a worsening affect on the economy.
Obama is also enacting a raise in Income Taxes in order to fund more money to the economy.
Families tax rates who earn more than $250,000 will jump from 33% to 36% and those who earn more than $370,000 will go to 39.
6%.
Dividends and capital gains will also go from 15% to 20%.
Finally, tax deductions for mortgage interest and charitable giving will drop to 28%.
Companies fear that by reducing annual net earnings of consumers, it will have a crippling affect to companies trying to keep investors in the market (home builders, mortgage brokers, etc.
).
Relating to the emissions pollution example as stated previously, drilling for oil will also become a problem for oil companies.
Obama is very focused on diminishing pollution, due to the ever growing environmental problems we are beginning to see.
The government is determined to convert the economy to a cleaner energy resource, which is a threat to oil companies.
If cleaner energy resources are developed, it will be easier for Obama to tax oil companies drilling off the coast of the U.
S.
, since there won't be such a dire need for oil.
The oil industry's argument that they plan to relay strongly is that the taxing could jeopardize jobs and energy security.
They also stated that by making drilling more expensive off the U.
S.
coast could encourage more oil companies to move their business abroad.
Lastly, agricultural subsidies have also become a topic of argumentation.
President Obama feels there are too many wasteful agricultural subsidies in the market.
He plans to cut this down by capping payments to farmers whose gross annual incomes do not exceed $500,000.
The cap will stand at $250,000, which he projects will save $9.
8 billion in ten years.
Agricultural lobbyists argue that farmers will not be able to stay in business due to our current economic situation and with such a low cap on payments.
They contest that farmers need the crops to stay in business, that Obama contests, are wasteful farm subsidies.
To conclude, Obama's economic stimulus seems to have its own pros and cons to everyone.
Unfortunately, in order to rid ourselves of this current economic situation, risks must be taken.
There is no way to predict ahead of time if the stimulus will prove to be a success in the future or if it will cause more problems for the economy that companies argue will; that is the nature of the of the situation.
We do know however that something must be done, and no matter the terms of the stimulus, there will always be dispute over it.
Source...