If we don’t act fast, a plunge into depression is a growing risk in both the U.S. and the U.K. Quantitative easing will probably have to be started again this year in both countries. The so-called Bush tax cuts, which are scheduled to expire at the end of the year, should be extended as soon as possible….U.S. unemployment remains worryingly high at 9.5 percent and initial jobless claims are up again. Banks are still not lending, especially to small businesses and even though mortgage rates are at historic lows, house prices show no signs of recovering. Consumer confidence is down and spending is slowing…It’s time for tax cuts, which have the added advantage that they work quickly. Firms respond to incentives. The American Enterprise Institute’s suggestion that there should be a payroll tax holiday is a good one as it would boost household disposable income while encouraging firms to retain workers on payrolls.
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