Obama Aims to Cut Down Payday Loans

President-elect Barack Obama has a new idea for economic stimulus: Help Americans by giving them more money to take home on payday so fewer people will need payday loans.

Obama’s plan targets low and middle-income taxpayers. Details haven’t been ironed out yet, but he is proposing a tax cut.

How much extra cash will I get?

The structure of the tax cut has not been decided yet. But this article from CNN suggests that affected Americans could see $83 to $166 more on payday. That could be the difference for some Americans who currently need payday loans to make ends meet.

Obama is hoping that the extra cash will boost consumer spending and stimulate the economy. Many analysts are saying that in order to turn the economy around, the first thing that needs to change is people’s perception. Some of the decisions aimed at trying to correct the current recession have caused Americans to have overly negative views about the country’s financial state.

A new strategy

Whatever the new president does, at the very least he needs to avoid making the mistakes that the current administration made. This article from Time Magazine says that the Fed’s policy decisions actually contributed to the current economic crisis when they were trying to alleviate it.

Among other missteps, analysts say that the government is treating the current recession the same way it treated The Great Depression, and that is unnecessary and detrimental.

Time suggests that the current financial crisis is really a crisis of confidence. Lenders don’t believe that loans will be paid by, either by consumers or by other banks. Consumers don’t have confidence in banks, the economy or even confidence enough to spend the cash they do have.

Restoring confidence

Come January Obama will have to face this crisis of confidence. The Washington Post reports that consumer confidence is currently at an all-time low.

The Conference Board Consumer Confidence Index conducted a survey this month. Among the results, the Board found that 42 percent of consumers view jobs as “hard to get.” It also found that compared to last month, a higher percentage of Americans expect business conditions to continue to get worse.

The Post also reported that the housing slump is continuing to grow worse in many parts of the country. Time reports that as the government continues to throw money at banks to help the credit crisis, these actions send a negative message to consumers. This worsens people’s perception of the economy, and the cycle of low consumer confidence perpetuating a shrinking economy continues.

The payday plan

Well, Obama certainly has his work cut out for him. Perhaps his plan to boost your payday will help turn things around. He has an additional plan, besides the tax cut, to help get extra cash into the hands of working Americans. He calls it the Make Work Pay Credit, and it would require employers to cut down the amount withheld from payckecks for taxes.

This plan might only amount to about $20 extra per paycheck. However, if both Obama’s plans are enacted, workers will end up with enough extra money to boost the economy. That’s the theory at least. Now that the recession is being viewed as a crisis of confidence, Obama hopes that if payday gets bigger confidence will be restored and spending will increase.

This financial education article was provided by your payday loans source.