NEW YORK (ForexNewsNow) – As he embarks on the 2012 presidential campaign trail around the country, US President Barak Obama has recently raised the possibility of a new fiscal stimulus plan. Indeed, the U.S. economy is going through a new period of economic slowdown and with an extremely accommodative monetary policy, which has no real room to maneuver anymore, budgetary policy remains the only way to support growth. The announcement of the details of this recovery plan, which would mainly help the labor market, is scheduled for September.
However, the information currently available suggests that the proposals to be announced will include an extension of existing measures, such as lower payroll taxes on employees and long-term unemployment insurance, with some new measures such as the creation of an infrastructure bank, payroll tax holiday for employers and some tax cuts.
To maintain the fiscal credibility of a country already weakened by the recent downgrade of its debt rating by Standard & Poor’s on August 5, such a plan will have to be counter-balanced by national tax reform in the long term. Nevertheless, the recurring Republican opposition to higher taxes for the upper echelons of society may still complicate its acceptance in Congress. Most analysts agree that a short-term fiscal stimulus combined with a credible plan for long-term fiscal consolidation remains the most desirable option for the U.S. economy.