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Public Statements

ENews

Op-Ed

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ENews January 25, 2008

What's Inside

1. Interest Rates Cut
2. An economic shot in the arm!
3. Protect America Act in danger
4. Spread the e-News

Interest Rates Cut

The Federal Reserve slashed two important interest rates by three-quarters of a percentage point this week. The Fed lowered its federal funds rate, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans, to 3.5 percent from 4.25 percent. The Fed also lowered its discount rate, which is what it costs banks to borrow directly from the central bank, by three-quarters of a point, to 4 percent.

This was the biggest rate cut by the Fed since October 1984

Treasury Secretary Henry Paulson, in a speech to the U.S. Chamber of Commerce said that he hoped the rate cut would restore some confidence in the financial markets and U.S. economy. And the Fed is still widely expected to cut rates again at its January 30 meeting.

The Congress and the President continue to work on an economic stimulus package in order to help consumers (See below). Federal Reserve chairman Ben Bernanke endorsed this plan during a speech to the House Budget Committee last week and urged Congress to act "quickly."

Read the Fed Statement here:
http://www.federalreserve.gov/newsevents/press/monetary/20080122b.htm

The House of Representatives may consider the economic package as early as next week.

An economic shot in the arm!

New Jersey's families and businesses are feeling squeezed by rising costs of living, with gas prices skyrocketing, costs of health care rising, and home mortgages becoming more volatile. In fact, a U.S. Labor Department report released this month reported that wholesale inflation was up 6.3 percent last year, "reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil."

Additional economic data make clear that the U.S. economy was doing well last summer, but took a perceptible downturn in the final quarter of 2007.

Since last summer, it has become clear that a number of large financial institutions have invested in potentially risky mortgage securities. Recent huge write-downs of assets by financial institutions highlight serious concerns about the value of mortgage-backed securities. As a result, uncertainty about the extent and depth of these questionable investments related to subprime and other mortgages has spread across the housing market, affecting home values, stock prices, and fundamentally, consumer confidence. Indeed, these are global concerns, reflected in markets worldwide.

These concerns top the 2008 Congressional agenda. Indeed, Congress and the President are acting quickly to develop an "economic stimulus package", which pumps money into the economy to shore up spending by consumers and induce job-creating investment by companies, large and small, which traditionally serve as our engines of growth.

"We have to get this right," said Rep. Frelinghuysen. "Any successful economic package will have three main components: it must be targeted, temporary and timely. And in order to be timely, it has to be bipartisan. I am going to work with my colleagues across the aisle to expedite the process. In the final analysis, what we act upon must instill confidence here at home, and whether we like it or not, in foreign financial markets as well."

The White House and the House Leadership yesterday announced the framework of a bipartisan agreement:

Rebate Checks for individuals:

• Low-income individuals who earned at least $3,000 in 2007 but paid little or no income taxes would get at least $300 ($600 for married couples).
• Higher-income earners who paid income taxes, whether on wages or investment income, would get checks worth up to $600 ($1,200 for married couples). Payments would be phased out for individuals earning more than $75,000 in adjusted gross income and married couples making more than $150,000. The phase-out would cut 5 percent of the check amount for each $1,000 above the higher-income threshold.
• Anyone qualifying for either category above also would get an additional $300 per child, up to the age of 17, with no cap on the number of children who qualify.

Business tax reductions:

• Companies would get a 50-percent bonus depreciation in 2008 for expenditures subject to depreciation over 20 years or less.
• Upfront deductions for small businesses would be boosted — to as much as $250,000 in the year of purchase which is roughly twice the current expensing limit. Overall investment limit = $800,000.

Housing:

• Boost the size of mortgage loans that the Federal Housing Administration may insure and that Fannie Mae and Freddie Mac may purchase:
• A one-year increase in Fannie and Freddie's conforming loan limits, from $417,000 to a maximum of $729,750.
• A permanent increase in the FHA loan limit from the current $367,000 to a maximum of $729,750.

The specifics of the package may not be final. Members of the Senate have indicated they may want to amend it in coming weeks.

Of course, this package as currently written is not perfect. "While on its current path it meets the standard of ‘targeted, temporary and timely,' it does not include the strong signal that that Congress will make the tax reductions of 2001 and 2003 permanent," said Frelinghuysen. "Families and small businesses have been taking advantage of tax cuts we enacted years ago - for marriage, for having children, for adopting children, for saving money, for paying on college loans, and for passing along your estate to your family. They are doing serious planning today and they need reassurance that they will not be socked with a major tax increase when these historic tax cuts expire in the next few years!"

And accompanying any stimulus package must be a renewed emphasis on oversight. "We need a more engaged Federal Reserve Board, Treasury Department "watchdogs" and yes, Congressional committees. Frankly, the question might be where are private banking and investment companies with their economic analysis and financial projections?"

It will be a major achievement in a Presidential election year on behalf of the American people to set aside partisanship and agree to a near-term stimulus plan designed to calm the unsettled economy. "I look forward to working with my colleagues on both sides of the aisle to use the best attributes of our economy - lower taxes, less intrusive regulation, pro-growth fiscal policies -- to rebuild the strength of our economy, said Frelinghuysen. "Our natural inclination as a country is to be inventive, opportunistic and entrepreneurial. We need to capitalize on these traits as we build a strong economy for the future."

Protect America Act in danger!

In June of 2007, the Director of National Intelligence notified Congress of a dangerous loophole in our ability to obtain foreign intelligence. In August, Congress passed the Protect America Act and closed for six months the terrorist loophole in our surveillance laws and entrusted intelligence officials - not government lawyers - with protecting our national security. This critical anti-terror law will now expire on February 1st. If an extension is not passed in time, intelligence agencies will be blinded to our enemies' plans.


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