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REBUILDING AMERICAN ECONOMY 2013

To: The Right Honourable American President Mr. Barack Obama   

From: Athinarayanan Sanjeevraja

Date: August 3, 2013

RE: Your Economic Vision

Suggestion:

Good Morning Mr. President. Let me start by paying my respects to you and through you to.

Mr. President, India’s Business Line reported that “Obama to outline his vision for rebuilding US economy.” American economy may not grow as fast because US consumer spending crowds out investment spending. But I see US economic outlook improve gradually during the second half of 2013. According to me, investment spending is much more likely to be growth enhancing. If I am not mistaken, US inflation rate was recorded at 1.8 percent in June 2013. Inflation is not at very high level in US. If inflation is very high, it adversely affects fixed business investment. I identified fiscal policy for instance, tax cut that stimulates investment spending. Corporate tax rate should be lowered, an investment tax credit should be given to American companies who’s establishing or expanding their business in US. Such changes in tax policy can enhance investment spending because firm’s investment spending decisions are made in the light of after tax cost and returns.

Mr. President, it is vital to have proper balance in the American economy between consumption and investment but consumption spending should not be promoted at the expense of investment. But investment spending plays a vital role in stimulating slumping economy. So I request you to increase in the investment tax credit. As a result, a certain percent of the purchase price of new goods could be taken as a credit off of the firm’s tax. In addition, Federal Reserve should act to lower interest rate which would encourage investment spending. Federal Reserve already keeps the interest rates low. The low interest rates of the global financial crisis 2008 certainly contributed to the American economy recovers from the crisis.   

Let me now conclude Mr. President, as has been pointed out, business investment spending is very important now to the fast economic growth. Declines in business investment spending often contributed to the economic recessions or downward economic growth. According to my analysis, fiscal policy action, for instance, increase in the investment tax credit for companies to stimulate investment is deemed desirable.   

Thank you for your attention.

Sincere Regards,
Athinarayanan Sanjeevraja.   
Athinarayanan Advisory Authority

Athinarayanan Twitter   

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