Recently, the Fed has been in a crises with the current market situation. The Fed is expected to do something about the possible recession as a result of factors such as the housing market. In this article, Robert Reich claims that tax cuts are the answer to the preventing the recession and not the Fed cutting the the federal rate. With major concerns in the economy right now and many homeowners trying to sell their homes without much success, the nation is experiencing rapid loss in jobs in the mortgage, contractor, and many other related industries. Foreclosures are also at an all-time high.
I agree with the article, in that the Fed is not going to be able to turn around the market; however, I don't agree that tax cuts for the middle and lower classes is the answer to avoiding a recession. Doesn't there have to be more than just tax cuts to turn around the economy in a major crises? What else could be done to prevent a recession? With middle-class and lower-class Americans struggling to survive, I don't believe tax cuts will be sufficient because many people in these classes are too high in debt and will not spend the extra money from the tax cuts on other goods to prevent a recession. Also, I believe the article contradicts itself in saying that the middle-class will spend more with a tax cut because it also says that Americans are "so far in debt." With mortgage debt a huge part of the possible recession, payroll tax cuts wouldn't put much of a dent into the outstanding mortgage debt of Americans. Plain and simply put, many Americans purchased homes and expected to be able to get instant equity out of the home and turn it for a profit quickly. As a result, many Americans paid top-dollar for homes and are now stuck with the debt, which they can't afford. Is a recession inevitable?