Word: stimulus
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...issue, though, is how many companies would actually deserve the tax credit. Nearly 12 months after Congress passed the $787 billion stimulus bill, and in the wake of a homebuyer tax credit and Cash for Clunkers, economists and others are paying more attention to the collateral cost of stimulus. The question with this proposal is how many of the million companies that Obama predicts would be awarded a job-creation tax credit would have hired workers anyway...
...debate. If the Cash for Clunkers program or the homebuyers' tax credit is any guide, the number would be relatively high. Car-research firm Edmunds estimates that just 18% of the nearly 700,000 automobiles that were bought through the Cash for Clunkers program were a result of the stimulus. The rest, 82%, went to people who would have gotten new wheels anyway. The $8,000 homebuyer tax credit did a little better. In that instance, economists estimate that 33% of the 1.4 million people who collected the credit bought a home because of the government assistance. (See the worst...
Even those who support the tax credit say that, as with those earlier programs, the percentage of companies collecting the tax break who are hiring because of the job stimulus will be very low. John Bishop, who teaches about human resources at Cornell University and has proposed a job-creation tax-credit plan, says about 80% of any tax credit for new hires would go to companies that would have added workers anyway...
...fallout from its recession-fighting methods. The government used the same tools as every other to support growth when the financial crisis hit - cutting interest rates, offering tax breaks and increasing fiscal spending - but the scale was smaller than in China. Goldman Sachs estimates that India's government stimulus will total $36 billion this fiscal year, or only 3% of GDP. By comparison, China's two-year, $585 billion package is roughly twice as large, at about 6% of GDP per year. Most important, India managed to achieve its substantial growth without putting its banking sector at risk. In fact...
...India maintained robust growth without Beijing's hefty stimulus in part because it is less exposed to the international economy. China's exports represented 35% of GDP compared with only 24% for India in 2008. Thus India was afforded more protection from the worst effects of the financial crisis in the West, while China's government needed to be much more active to replace lost exports to the U.S. More significantly, though, India's domestic economy provides greater cushion from external shocks than China's. Private domestic consumption accounts for 57% of GDP in India compared with only...