Chapter Eight: Rights group attacks Dutch immigration policy

http://biz.yahoo.com/ap/080515/netherlands_immigration.html?.v=1

Dutch has passed an immigration policy that seems discriminatory to rights groups. They require that they look at immigrants’ language and culture before they are allowed in. The tests cost $540 per try and they are also charged with monthly immigration fees. Gerda de Lange, a government spokeswoman, states that they only want people that understand the Dutch and know what to expect. However, the rights groups are saying that the Dutch are discriminatory to keep certain cultures out of their country. The test also is targeted at developing country immigrants mostly Turkey and Morocco. They don’t even test certain wealthier countries such as United States and Japan.

This relates to the immigration policy in Canada that was explained in the book. In Canada, we test immigrants for their ability to contribute to the economy. Immigrants may help the unemployment rate or it may worsen it depending on what immigrants come and where they settle. A good qualified worker may only be helpful to the economy if there is a job available and if they are will to work. Also, Canada tries to reunite families by immigration, while the Dutch are criticized for keeping families apart. Immigration, if used correctly, may reduce structural unemployment.

The Dutch are certainly using immigrants the wrong way. They are keeping people out because of their culture even if they are educated and ready to contribute. They seem like they don’t want immigrants unless they are very wealthy and smart from certain races. I am not sure if they don’t even consider certain people from developing countries, but it seems that way by the reactions of the rights groups. Gerda de Lange’s reasons are convincing, but it is hard to determine how exactly they evaluate immigrants and how much they weigh culture when evaluating them.

Chapter Seven: Fed poised to cut rates; may take a break after that

http://biz.yahoo.com/ap/080429/fed_interest_rates.html?.v=4

The United States is still in recession and the interest rate cuts are slowly working to allow a better economy. However, inflation is becoming a huge problem in food and energy prices. The Federal Reserve plans to lower the rate to 2% and then leave it at this level for the year and maybe the next. They will have a meeting on April 29th to decide what their best move is. The problem is that if they lower the rates too much, inflation becomes a problem, but if they don’t lower the interest rates, the recession will be a problem.

This chapter explains how the bank can change economic situations by changing interest rates. We learned that a lower interest rate would lead to increased borrowing, which leads to an increase in spending. With increased spending, GDP would rise and allow the economy to counter a recession. The United States is trying to do this, but inflation is kicking in since there is more money, it is wise of companies to increase prices. This inflation will make the increase of money supply not effective as a way to counter the recession since inflation causes demand to drop.

I think the United States should slowly lower their interest rates without causing too much of a decrease so that inflation doesn’t kick in too fast. Leaving it to 2% and then taking a break doesn’t seem like a good idea in my opinion because inflation will be a huge problem. They should just increase government spending and continually changing interest rates to the economic situations to increase GDP. The recession is also not that bad in my opinion. They could possibly just let it pass by and not do too harsh economic changes that may cause side effects such as inflation.

Chapter Six: Plan would double state income tax for high earners

http://www.sj-r.com/news/stories/28056.asp

Mike Smith plans to raise income tax rates in Illinois from 3% to 6%, which would generate about $3 billion tax revenue. The tax increase will only apply to people earning over $250,000. The revenue will be spent on infrastructure, education, and tax relief for earners under $250,000. Many people are agreeing with him such as Rep. Joe Lyons, a Chicago Democrat who likes the idea of Robin Hood referendum. However, not everyone agrees with Smith. People also believe that increasing taxes will not help until they learn to control their spending. United States is in a recession and Rep. Frank Mautino recognizes this. He says he does not support it because doubling taxes during a recession is just insane.

In chapter 6, we looked at the determination of national income mainly using GDP, the gross domestic product. In times of recession, we are taught to lower taxes or increase government spending. Smith is doing the opposite, which is a bad idea. He is not just raising taxes a little bit, but doubling it. This will cause a great decrease in GDP where they are looking for an increase. Using the equations taught and assuming MPC is 0.8, change in GDP will be –[3 billion x (0.8/0.2)] = -$12 billion. This is a huge change in GDP and I do not think they will carry through with this plan.

I’m not sure what Smith is thinking, but I think he will use the tax to increase government spending. This sort of makes sense, but it will be really difficult for the civilians in Illinois. If they just try lowering taxes and carefully spending, they should do all right for the future. They are having problems controlling their spending so I think they should get professional economists to figure out where and when to spend their government funds.

Chapter Five: New jobless claims rise more than expected

http://biz.yahoo.com/cnnm/080320/032008_initial_claims.html?.v=4

The United States is receiving more jobless claims than were expected this week. It is the highest level of unemployment claims since 2005. In the past four weeks, there is an average number of 365,250 people whom are claiming to be unemployed for the first time. This shows that they were never unemployed before, but they have just become unemployed. The United States were unsure if they were going into a recession, but according to the chief U.S. economist for Lehman Brothers, this sudden level of unemployment can be used to verify that they truly are in a recession.

In chapter five, we learned what it means to be unemployed and the different types of unemployment. When they are claiming to be unemployed it doesn’t just mean they don’t have a job. It also means they are looking for a job, but cannot get one. If they don’t have a job and they aren’t looking for one, then they are not unemployed, they are not in the labour force. In my opinion, I think the United States is suffering mostly from demand-deficient unemployment. People are getting worried about the economy and therefore are less willing to spend their money. This means less investments and less demand overall causing a shortage of jobs and economic activities.

The United States are going into recession, but it isn’t that bad as some might think. It is natural to have a recession after an expansion. It is just how the economy works and people should not be too worried about this. Their economy will come back in a year or two in my opinion since they are still a very powerful country and have lots of experience in dealing with problems. Also, the number of unemployed people may not definitely indicate anything about the economy. This number may have increased not because people are getting fired, but it may be people who have just decided to join the labour force.

Chapter Four: BC’s 2001 incentive-based tax cuts helped reverse economic decline

http://www.fraserinstitute.org/commerce.web/newsrelease.aspx?nID=5163

According to recent studies, there is an evident relation between tax-rates and the countries GDP per person. This article focuses on British Columbia where it shows that the tax rates have decreased over the years. In 2001, the corporate income tax rates decreased from 16.5% to 13.5%, then in 2005 it went to 12%. Also, there was a 25% reduction in personal income tax rates in 2001. Doing this lead to increased economic activity, which allowed the growth of our economy to benefit our province. Provinces that reduced their corporate income tax rates by 10% resulted in a GDP increase of 1-2% per person. Provinces that lowered top marginal personal income tax by 10% resulted in a 1% increase of GDP per person. These values were over a period of 1977-2006.

In Chapter 4, the income taxes provide the most tax revenue for our government. Using the information from the book, the 2002 tax revenues come from 46.5% from personal income tax. Corporate income tax accounted for 12.9% of the tax revenue as well. This shows that over half the tax revenue comes from income tax. It seems unnecessary to have such a large percentage of income directly taken from the people of the country. The tax seems to be too much of a burden on people and is probably the reason why lowering the tax rates will increase economic growth.

These results are caused by provincial decrease in taxes, but what if the federal government lowered tax rates as well? There would be a larger increase of economic activity and our country as a whole will increase in productivity. However, we must remember why we have taxes in the first place. We must not lower the taxes too much, but if we can afford to lower it, it is proven to increase economic growth. Right now, I believe there are a lot of unnecessary taxes in our country. For example, the personal income tax is around 25%, which is extreme and it gets larger with increased income. It doesn’t seem like the government in Canada currently spends the tax revenue to its full potential. Often I hear they spend a couple billion on random things that aren’t necessities whereas they can lower tax rates and increase economic growth instead.

Chapter Three: Tax Rebates Urged to Rescue Economy

http://biz.yahoo.com/ap/080117/economy_stimulus.html

The United States is in difficulty with their falling economy and the government must do something to patch it up. George Bush plans on giving tax rebates of $300-$800 per person whom have an income of under $85,000. He also plans on giving tax breaks to many companies that would benefit the economy, which are kept anonymous. America is in a slump and Bush doesn’t want to go into a recession. The last recession that the United States has been in was in 2001. This is a huge amount of money, which is totalled to be around $100 billion dollars.

George Bush has decided to interfere with the free market economy to redistribute income distribution and to boost economic activity. The economic recession is natural in the business cycle, but Bush is trying to reduce its amplitude by bringing the economy up before it gets any lower. The tax rebate is to give money from the wealthy to the less wealthy. The Federal Reserve Chairman believes that it is beneficial for the economy to give money to the people who would spend it quickly. The companies receiving tax breaks are for businesses investing in new equipment, increases in food stamps, and higher unemployment benefits so that the economy can benefit from their business.

I’m glad that the government is stepping in and can recognize when there is a problem with the economy. I agree with all of Bush’s decisions and he backs them up with strong, well thought out points. Many people are supporting him and he has been planning this with many congressional leaders. I think that $100 billion is quite a lot, but if it can cause competition and reverse the recession, it is definitely worth it.

Chapter Two: Demand of Single-Family Homes

http://news.yahoo.com/s/nm/20071030/bs_nm/usa_economy_homes_index_dc;_ylt=Ak5M7gCmnNtZRVFzua8b3IDv5rEF

Prices of single-family homes are dropping at its fastest pace since 1991. In 1991, there was the worst annual decline of 6.3 percent. Prices are dropping at around 0.8 percent a month this year. Tampa and Detroit have the steepest yearly price drops of 10.1 percent and 9.3 percent. Single-family homes are expected to have a record 7 percent year-over-year drop by December. These declines would bring mortgage rates 0.5 to 1 percent down to boost affordability measures. “The fall in home prices is showing no real signs of a slowdown or turnaround,” says Robert Shiller, founder of the indexes and chief economist at MacroMarkets LLC.

The demand for single-family homes is decreasing rapidly because of many factors. First, the prices before were so high that it was out of many peoples incomes. They had to lower the prices now since many people could not afford houses. Substitutes for housing has also been gaining popularity. Apartments and condos are gaining a good reputation and are beginning to become as popular if not more popular than single-family homes. Speculators are also selling the houses they own since they feel that the prices are going to drop. The population is also slowing down a bit because of the awareness of being overpopulated. This slow down is also causing housing prices to slow down as well. Finally, the taste and preferences of smaller families and apartments are increasing. People do not need to have single-family homes as they did a couple years back.

I think the price drop is a good thing for the economy because it allows houses to be more affordable. Prices have been going up non-stop for a long period of time now and it’s good that the prices are changing paths. I’m planning on living in a house when I am older, but was worried about the constant increase in prices. Now that the prices have dropped, it makes getting a house a lot easier. The demand for houses will rise again in the future, but I think it will keep rising and dropping around the same range.