Policy options

Date posted: September 7, 2011

Everyone is anxious to get the economy moving faster and to create jobs. To many it seems the economy is going backward rather than forward. N.C. State University economists considers some of the things the government can do to improve the economy.

“Well, in terms of the president and Congress we’re going to have to wait to see what the new tax commission comes up with. There may be in some of the initiatives there for example to extend the reduction in the payroll tax that we’ve all been enjoying this year. There may be some initiative to do that further.

“Some have talked about a new big stimulus plan. The politics of that — we’ll have to see how that plays out.

“I think where the focus may be — will be — on the Federal Reserve. The Federal Reserve has already done one thing since the big drops in stock market. They’ve said that they’re going to keep their interest rates, which are effectively at zero, they’re going to keep them there for maybe the next two or three years. So … the Federal Reserve is already assuring us lower interest rates.

“And some have talked about maybe we need an initiative from the Federal Reserve, which does have a lot of money primarily because they can print money to help homeowners who are under water in their mortgage.

“And a very unique plan that I’ve heard talk about is where a homeowner who owes more on a house than it’s worth, some agency maybe like the Federal Reserve would come in and in essence finance that — that amount by which they’re under water would sort of take over co-ownership of the house, thereby allowing that person to stay in the house. They’d also — the Federal Reserve or whatever agency — would also share in any future appreciation.

“Many economists think that really the crux of the problem right now is the home ownership market, and we haven’t seen much improvement there. So, maybe look for a plan along those lines possibly from the Federal Reserve, possibly from somewhere else down the road.”

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