Issue #1 continues to be the economy. The latest CNN/Opinion Research Corporation poll shows 61 percent of respondents believe the economy is their primary concern this election season. A big issue among voters who go to vote in the next couple of weeks will be taxes.

Both Barack Obama and John McCain want to keep the Bush tax cuts of 2001 and 2003, but Obama would let those cuts run out for the wealthy upper-income Americans. McCain disagrees, and says all Americans should keep their taxes reduced, including the wealthy - who the Republican presidential candidate believes can use that extra income to invest in businesses and jobs good for the economy.

So, they both agree on tax cuts for most Americans, but disagree on the details. That’s why the folks at the Tax Policy Center (a joint venture between the Urban Institute and the Brookings Institution, two non-partisan research groups in Washington, D.C.) have crunched the numbers and have come up with some updated projections of what your tax bill could like in 2009 with each candidate's tax plan. Here's a look:

1) If you’re in a lower tax bracket, you stand to see a bigger tax cut with Obama’s plan. For instance, if you make between $19,000 and $38,000 a year, McCain's plan gives you a tax break of $113, but Obama's plan gives a whopping $892 tax break.

2) If you’re in a higher tax bracket, you stand to see a bigger tax cut with McCain’s plan. For instance, if you make between $112,000 and $161,000 a year, McCain's plan now gives back more at $2,584, while Obama’s tax cut slows down to a mere $2,135.

3) If you make over $250,000 a year, your taxes will go up under Obama’s plan. McCain on the other hand wants to keep the Bush tax cuts for upper income earners.

So, there you go: most Americans will see cuts to their average tax bills with both their plans. The benefits with McCain's tax plan seem to grow with the more money you make, while the wealthy pay more under Obama's plan. Despite some differences between the two, there is the same downside to both plans: these tax cuts will only fuel an already large national deficit.

The Tax Policy Center estimates in 10 years, McCain's proposed tax plan could increase the deficit by as much as $7.4 trillion, and Obama's plan will increase it a little less - to about $5.9 trillion. In this time of financial crisis - where the government has instituted a stimulus package and is about to bailout big banks with stock purchases and buyouts of distressed assets - maybe the candidates should let Americans know we need some tax hikes to pay for all that. But, everyone knows that’s not how you get elected president in this country.

Does thinking about the economy have you down? Do you wince when you see a “Wall Street Journal?" Do you fear for the health of your favorite banker?

Well believe it or not, despite the economic meltdown and the now routine giant swings in the stock market (Wednesday’s massive sell-off marked the second biggest one-day point loss in history), there is actually some relatively good news coming down the pipe these days. Now remember, I said "relatively."

1) Oil is getting cheaper. On Thursday, oil dipped to the cheapest it’s been in 14 months and, after a summer of record high oil and gas prices, that’s a boon to the average consumer. On Wednesday, oil settled at $74.54 per barrel and last week Deutsche Bank issued a report suggesting oil may even fall as low as $60 a barrel. This is a double-edged sword, though: while it’s nice that it’ll be cheaper to fill your tank, oil prices are dropping because of producers’ worries about a global economic slowdown and decreased demand.

2) Prices didn’t rise in September. Bucking the upward trend for most of this year, consumer prices were flat in September. That’s because sinking gas, clothing, and car prices offset the jump in food and medical care prices. In August, prices even dipped. It’s a nice if short break for consumers. Again, though, there is a downside: weekly wages dropped 2.5 percent in September compared to a year ago, marking the 12th straight month in which wages sank.

3) Jobless claims declined. According to a report out on Thursday, fewer Americans filed new claimed for unemployment insurance than expected last week.  Claims also fell the week prior. Unfortunately, as ever, there is a bit of bad news here too: 2 weeks ago, jobless claims had spiked to the highest level since right after the attacks on September 11, 2001.

You have to take the good with the bad, I guess. Decreased production and falling prices indicate that we are indeed in the midst of an economic slowdown. But for now at least some of these stories indicate that hard-pressed consumers might be saving a couple of extra bucks here and there.

When the $700 billion bailout passed through Congress on October 3, the results were anything but immediate: the credit market remained frozen and investors were still jittery, resulting in massive stock sell-offs last week.

So Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and President Bush buckled down and set to work deciding how exactly the government would use its newly granted powers to shore up the still faltering U.S. economy.

On Monday, stocks rallied on the Treasury’s announcement that it would buy a direct stake in U.S. banks and make loans to several central banks in Europe for any amount needed. The Dow shot up a record 936 points. Tuesday morning, President Bush and Secretary Paulson unveiled even more details about the new and improved bailout plan. Let’s take a look.

1. Direct investment in banks. The government will spend $250 billion to purchase shares in American banks. Roughly half of that will go to nine of the nation’s largest banks, and this number could still grow. The goal is to jump start the credit market by giving banks the confidence to start making loans to each other, to businesses, and to individuals.

2. Rules on CEO compensation. The nine major banks have agreed to accept limits on executive pay in exchange for government capital. Golden parachutes for executives will not be issued while the government remains a shareholder.

3. FDIC insurance on non-interest accounts. President Bush announced all bank deposits in non-interest bearing accounts are now insured by the Federal Deposit Insurance Corp. These accounts are usually used by small businesses, and the insurance aims to quell worries about payroll and large deposits. The government is also temporarily backing most new bank debt.

These moves reflect a marked change of course for the government bailout. The government’s first intent was simply to buy up toxic assets from troubled financial institutions. Now, it is actually injecting capital into banks directly. It’s a sign of how dire circumstances have become, but also of how flexible the government is willing to be in addressing the unfolding financial crisis.

A massive financial bailout package was passed by Congress on Friday, but frozen credit markets remain stalled and stock investors still have a bad case of the jitters.

Banks are afraid to issue new loans to businesses and individuals alike - loans that are the lifeblood of the economy. Individuals use them to buy cars, houses and dishwashers, and businesses use them to cover day-to-day expenses, including a little thing called payroll. With no loans to cover short-term expenses, businesses may have to figure out a way to save somewhere (read: job cuts), and that’s a situation nobody wants.

When it was first proposed, some considered the $700 billion government bailout package a drastic step - it is the largest government intervention into the economy since the Great Depression - but the passage into law has not kick-started credit markets yet.

That’s why the government might be might be considering more radical steps to jumpstart confidence in the economy. In my last blog, I told you some of the tools the Fed and the Treasury Department have used so far. On Wednesday, Treasury Secretary Henry Paulson said the government is considering “all options” to shore up the U.S. economy, and reports of possible options under consideration have proliferated. Let’s take a look at what Plan B is starting to look like:

1. The government could take direct ownership stakes in banks. Reports out say the government is considering exercising a new power granted it in the bailout bill to directly inject capital into banks in exchange for ownership stakes. The thinking is that this would instill enough confidence - and cash - in these banks to spur more lending. But, it’s a move that makes market purists cringe, who loathe growing government interference in the economy.

2. The government could continue to lend gobs of cash to troubled financial institutions. On Wednesday, the Fed said it will lend $40 billion more to insurance giant AIG. That’s on top of the $85 billion the government gave AIG last month. The government’s lending policies are very flexible given the bailout, and lending to troubled financial giants will likely continue. It’s considered a less extreme measure than actually buying ownership shares of a company.

3. The Fed might cut interest rates even further. On Wednesday, the Fed, in conjunction with 5 other central banks around the world, cut its benchmark rate by half a percentage point. It was the first time in history that the central banks have acted together to cut interest rates. Since the credit market remained stalled even after the announcement, a further interest rate cut could be possible.

The point of all this is, of course, that the government is not out of options. But this is really a trial-and-error method. There is no precedent for this sort of global downturn, and the even the financial wizards at the Fed and Treasury Department can’t know how investors and banks will react to their decisions. Even drastic measures may have little effect. In a lot of ways, it’s just a waiting game.

Both the Fed and the Treasury Department have been working overtime recently to stem what is now a global financial crisis that only seems to be growing.

It started with a wave of "write-downs" by Wall Street firms who stuffed their portfolios with now toxic mortgage-backed securities, and other debt instruments related to America's down housing market. Fears spread as the very financial system itself appeared in danger of collapse when a wave of big banks started to be insolvent, because it seemed everyone had placed bad bets on real estate.

That in turn, led to a freeze on credit - the very engine that funds the day-to-day operations of businesses all over the country. Banks stopped lending to each other and tightened lending standards to the public. That caused panic in the stock market - with Monday alone seeing an 800 point drop in the Dow during the trading day before closing higher, but still below the 10,000 mark.

Now, that fear has spread the world over, with stocks in Asia and the Middle East tanking, and markets in Europe struggling to stay out of the red as the continent deals with its own bank failures.

All this has forced the Federal government to act to avoid a wider financial contagion, by deploying a wide array of tools to help calm the economy - some of them unprecedented. Let's take a look at some of what's being done:

1. Buy up short-term debt: In an unprecedented move, the Fed announced Tuesday that it will now provide cash to companies by buying up unsecured and collateralized short-term debt, otherwise know as "commercial paper," so businesses can fund their day-to-day operations with credit that had been frozen by banks.

2. Bail out financial firms: On Friday, Congress passed a bill to buy up to $700 billion of toxic securities from struggling financial firms, so they can remove these now practically worthless securities from their balance sheets, shoring up confidence in financial institutions.

3. Guarantee bank buyouts: This has been done on several recent occasions, where Fed officials negotiate buyouts with fiscal guarantees from the government, including the buyouts of Washington Mutual by JPMorgan Chase and Wachovia by Citigroup (now being challenged by rival Wells Fargo), or by lending money to insurance giant AIG in return for a large stake in the company.

4. Inject funds into the system: Last month the Fed injected $180 million in additional funds into the banking system, in conjunction with several other central banks around the globe, to increase cash "liquidity" in a bid to get money flowing in the economy

5. Trim borrowing costs: The Fed has cut interest rates several times in recent months, bringing the Fed Funds Rate down to 2 percent. Now some are predicting that another rate cut could be in the works by as much as half a percentage point; and, under new legislation passed last week, the Fed now has the power to set a floor under its main interest rate on bank reserves that some are calling a cut by "stealth."

Even with all these tools being deployed, the near future remains uncertain. The bailout did not have as positive an effect as many expected, and some speculate that, while it may prop-up the U.S. economy, it could do damage to economies abroad. Global stock markets could take a nosedive several more times, before we're out of the woods.

Still, the Fed and the Treasury have been proactive and tireless, creating new and sometimes untried tools to fight off a more drastic economic downturn. Not since the Great Depression has the federal government been so entrenched in trying to secure the nation's economy.

Wednesday night, with a vote of 74-25, the Senate approved nearly the same bailout package rejected by the House on Monday. The plan was sweetened with some politically savvy additions, including $150 billion in tax breaks for individuals and businesses and a temporary increase in the amount of bank deposits insured by the FDIC from $100,000 to $250,000. The House will vote on the bill Friday.

This entire credit crisis has brought up a lot of complex issues that the Average Joe and Josephine would never have thought about a year ago. Back then, most Americans had no idea what a subprime mortgage was: today it's dinner conversation. And now the bailout package- the largest government intervention into the economy since the Great Depression, if passed- has introduced a whole new set of questions to be grappled with. Let's look at the answers to the most important ones:

1) How long before credit starts flowing again? If this bailout passes, the reaction in the credit market will be nearly instantaneous. Banks will be able to get money quickly (assuming nothing else gums up the works..), and that means that loans to individuals and businesses should pick up within days.

2) How do we measure success? We're going to know if the bailout has worked when we see or hear the positive consequences for individuals and companies. The credit crunch has affected everyone from corporate giants like Caterpillar and GE to small businesses to individuals. We'll know the bailout has worked if companies start reporting increased availability of loans and ease fears of job cuts, and if individuals start getting approved for mortgages, car loans, and school loans again.

3) Should we watch for market reaction? No: ignore the stock market. The market is volatile these days and moves completely independent of the credit market. The stock market will react, of course- when the House rejected the bailout bill on Monday the Dow saw its largest point drop ever- but whether stocks shoot up or dive down, that has no bearing on the availability of credit.

The bailout will have direct consequences for every American. The real measure of its success is very personal: when your job's more secure, your neighbor's house can finally be sold, and your son can secure that car loan, that's when we'll know the government has done its job.

Monday, the House of Representatives shot down the proposed $700 billion bailout with a vote of 228-205, sending the Dow into a freefall of 777 points. The bill - backed by President Bush and both parties' presidential nominees - proved too divisive among the state representatives for many reasons: some claimed it was too hastily cobbled together, others were simply too scared of angering their constituents in an election year. One particularly favorite mantra of dissenters was that the bailout amounted to saving Wall Street tycoons from their own bad decisions at the expense of tax payers.

This “Wall Street versus Main Street” mentality, though, is far too simplistic. It neglects the simple truth that the failure of the government to act on the current financial crisis will directly affect all Americans, not just traders and banking executives. You might think I mean because stocks are dropping, but I don’t. The stock market goes up and it goes down: a loss of 777 points can be recouped in a matter of days, so that is not what should concern the average American.

What I’m talking about is the credit market: if institutions stop lending money, the consequences are far-reaching. And the institutions I’m talking about are not small players: these are countries, sovereign wealth funds, pension funds, hedge funds, and major banks. If they stop lending and investing, that will directly hurt you. Here’s how:

1) It will be harder to keep your job. Most businesses - small and large - depend on short-term loans from banks to cover their day-to-day operating costs. If banks stop approving such loans, businesses have to make ends meet somehow, which usually means cutting jobs.

2) It will be harder to get loans. Without government action to shore up confidence in the financial system, it will become even more difficult for the average consumer to secure auto loans, student loans, and home loans. These loans have already frozen up, and we’re seeing the consequences in those industries.

3) It will be harder to sell your home. It’s already a tough time in the housing market due to the subprime mortgage mess, but if you’re trying to sell a home or foreclosure is looming, the freezing up of home loans is an even bigger deal for you. After all, even if you’re lucky enough to have a potential buyer for your home, he might not be able to convince a bank to lend him the money to make a bid. Now you’re stuck.

The bailout bill rejected by the House yesterday is not the end of this legislation: it will now be further debated, reworked, and voted on again. The important thing to realize is that, whether you call it a Wall Street bailout or a rescue package, this bill directly affects you and your ability to save and spend. More than 600,000 jobs have already been lost this year, and the longer the government takes to step in, the more that number will grow. This is not a time to drag our heels.

President Bush just addressed the nation to seek support for a big bailout of the financial system by outlining the crisis we face: tightening credit, giant failing institutions, consumers cutting back on spending, because of fear for what’s to come - the whole shebang. His plan calls for the government buy up to $700 billion worth of troubled assets currently held by banks and other financial institutions.

The thinking goes that removing all those toxic assets from Wall Street’s balance sheets can help shore up confidence, and get credit flowing again. Washington lawmakers had been looking forward to a little R&R starting Friday - when Congress is scheduled to recess for the year. They’re unlikely to be putting their feet up just yet. With the proposed financial package a source of heated debate on Capitol Hill and many details yet to be hammered out, the bill may not come to a vote until sometime next week.

A lot of Americans are reacting to the bailout proposal with anger, asking why the government should be using tax dollars to bail out Wall Street firms who made bad bets. Treasury Secretary Henry Paulson and Fed Chief Ben Bernanke have been on Capitol Hill all week trying to talk up the plan, especially emphasizing how the failure to pass the bill will have far-reaching consequences that will affect every American. Bush noted the same alarm in his speech on Wednesday.

There are many valid criticisms out there, but we really need to do something now to help get our economy back on track. The bottom line is our financial system is close to a breaking point, because credit has “frozen-up.” So, what exactly are we talking about? Here’s a summary of what could go wrong:

1) Banks stop lending to each other, hurting businesses and consumers. Everyday, billions of dollars are lent between banks, and companies depend on that credit to help fund their day-to-day operations, including paying bills, or meeting worker payroll. That in turn hurts corporate profits, sapping tax revenue that funds government services.

2) Lenders can’t resell home loans, which means they become harder to obtain. That can push mortgage rates up, housing prices down further, which can result in a decline in government revenue from property taxes - sapping public funding for things local schools and services.

3) All this turmoil could hit Americans, where it hurts them the most - their jobs. Already, some 14 million American workers have been hit by the current credit malaise - in industries like construction, manufacturing, and now financial services.

The bailout proposal being hashed out by the politicians is certainly not a complete solution to our down economy - not by a long shot. We will still have a struggling homeowners reeling from the plummeting values of their homes. We will still have job losses - more than 600,000 jobs lost so far this year. And, we will still see prices go up for almost everything we depend on. But, we need to do something now that will restore confidence in the credit markets and provide businesses with the funding they need to operate. Whatever the politicians agree on in the end will probably end up being the greatest government intervention in the American economy since the Great Depression. Oh, how far we’ve come.

What a week this is turning out to be - and what a difference a week can make on Wall Street these days.

The latest in the turmoil consuming financial markets started last week when Federal officials met with Wall Street's titans to help arrange a rescue for two big investment banks holding too many "mortgage-backed securities," now practically worthless as a result of the ongoing housing crisis. Henry Paulson, Ben Bernanke and company refused to back any deal to rescue Lehman Brothers and Merrill Lynch with taxpayer money - pushing Lehman into bankruptcy and Merrill into a merger with Bank of America.

Then, mammoth insurer AIG warned of big losses from its own bad bets on U.S. real estate, but this time the Fed’s leaders agreed to provide up to $85 billion in credit to rescue AIG from certain bankruptcy because they said its collapse could pose systemic risk to the world financial system. As markets the world over reacted with fear to this, the Fed, along with several other central banks, injected $180,000,000,000 additional dollars into the world financial system, to shore up confidence and get banks to start lending to each other again.

Now, all of Washington has stepped into the fray to try to rescue Wall Street from itself - with Paulson and Bernanke negotiating with Congressional leaders to craft some sort of bailout in which the government agrees to buy up to $700 billion dollars of distressed mortgage-related assets from financial institutions, so they can remove them from their balance sheets.

The details are being hammered out right now - but we can assume it may resemble the bailouts to the Savings-and-Loan industry, or Chrysler two decades back: the government sets up an entity to buy and hold these assets, and sells them at a later date - hopefully making a profit in the process.

But, to shore up financial stock prices, the SEC took the unprecedented move of temporarily banning the "short selling" of stocks for 799 financial firms. And in the same breath, the Treasury and the Fed stepped in to guarantee troubled money market mutual funds, as fears grow that funds values could fall below the $1.00 a share threshold, as one did last week.

To top it all off, Goldman Sachs and Morgan Stanley – the last two independent investment banks standing on Wall Street - have both decided to transform themselves into "bank holding companies," meaning they will be able to acquire other banks and will be subject to more federal regulation, which will likely make the economy last turbulent.

Let’s define some of the financial jargon being thrown around by those big (bald) talking heads on TV this week as all these stories further unfold:

1. Mortgage-backed security: Banks lend money to homeowners through home mortgages; these loans are then bought from the banks and sliced up and repackaged into securities that investors buy and sell just like stocks. Those investors make money off the homeowners' monthly interest payments. The nation's housing crisis has forced many Americans to skip payments, or worse, foreclose on their homes, so investors don’t get the interest payments. That's why the securities become toxic assets to have on a company's balance sheet: nobody wants to buy them, and there's no market for them. Thus, all those institutions that hold these mortgage-backed securities - and they’ve got a lot of them! - are in big trouble.

2. Derivatives:A mortgage-backed security is a derivative security by definititon, because it derives its value from another financial security - in this case, home loans. But, there are some really complex derivatives out there using mathematical formulas that not even some financial wizards on Wall Street can comprehend - and a lot of those derivative securities get their values from the real-estate market, again wreaking havoc on Wall Street because financial firms hold too many of them.

3. Short-selling: This is a strategy used by sophisticated investors to make money when a stock price goes down. Investors will borrow stocks then sell them on the open market, betting the price will go down. They later buy back the stock and return the shares they borrowed. The short seller pockets the difference between the sell and buy price, and makes his profit - if in fact the stock price goes down. Bottom line, selling a stock "short" is a legal way to make money in the stock market. Peddling rumors about the state of a company's finances in order to drive down the price of stock you may be shorting is illegal. Apparently, the SEC fears that could happen in the chaos gripping Wall Street, and wants to prevent that from happening.

4. Credit Default Swap:This is a type of credit derivative which you can think of like an insurance policy: a seller agrees to make payments to buyer in the event of a predetermined credit event, usually a default on loans. The buyer pays fixed payments in exchange for this insurance. Thus, the seller of the CDS is making a bet that something won’t happen- that the loan won’t default. Leading up to the credit crisis, CDSs were widely used to bet that certain companies would fail. AIG’s participation in the CDS market largely contributed to their huge losses.

We'll see what Washington finally does to "bailout" Wall Street from its bad investments– and whether any benefits from it extend out to "Main Street."

Most of the major news stories have been covered to death: the Dow tanked 449 more points Wednesday, following Monday’s 500-point sell-off. Investors are still reeling from Lehman Brothers’ bankruptcy following talks with the British bank Barclays and Bank of America failed, and then Bank of America’s quick turnaround and snatching up of Merrill Lynch.

Then the government had to swoop in and save AIG - America’s largest insurer with over $1.1 trillion in assets and 74 million client in 130 countries - by lending it $85 billion to stave off bankruptcy. That’s on the heels of the Fed’s unprecedented takeover of mortgage giants Fannie Mae and Freddie Mac. Hold on, I need to catch my breath…

The economic turmoil has left people scared, and they’re fleeing financial giants they see as teetering on the brink of disaster. Morgan Stanley and Goldman Sachs - the only 2 independent investment banks left on Wall Street - have been getting hammered in the sell-offs, despite both reporting better-than-expected quarterly earnings. Now there are rumors swirling around that Morgan Stanley and Wachovia are courting, and Washington Mutual is putting itself up for sale.

So, in an effort to shore up confidence, central banks around the world - including the U.S. Fed, the European Central Bank, the Banks of Canada and Japan - have all agreed to pump an additional $180 billion into the world economy. Hold on, I need to get a glass of water…

With so many giant stories dominating the headlines, it’s easy to overlook some of the smaller tidbits that can nevertheless be hugely important. Let’s take a look at some of the stories that might have flown under the already-jammed radar:

1. The Fed decided to hold interest rates steady. There was a lot of buzz that the Fed would cut a key interest rate Tuesday in response to the agitation on Wall Street, but the Fed decided to hold the federal funds rate at two-percent. Despite an initial dip, the market reacted positively to the decision, which many saw as the Fed indicating economic conditions had not worsened.

2. Commodities prices are soaring. The upheaval on Wall Street has sent stock investors running for the hills - looking for gold and oil. Commodities are considered safer places to park cash while stock markets settle themselves down. As a result, oil prices jumped by $6 Wednesday - the second largest one-day surge ever; while, gold soared over $70 an ounce on that same day, the biggest one-day gain on record. Both oil and gold futures continue to rally.

3. The assets in a low-risk money market fund started dipping below “safe” levels. Money market funds have long been considered one of the safest investments around. Basically, the funds are required to invest in low-risk securities only and don’t tend to carry government insurance against losses. Generally investors don’t need to worry about huge losses, just about collecting interest, albeit slowly.

On Tuesday, though, the assets of the Reserve Primary Fund dipped just below a safety level that insures investors they can get all their money back due to bad investments in the now-bankrupt Lehman Brothers. It’s the first time any fund in the money market industry lost money for its investors since 1994.

Now that the beginning of the week’s initial panic may be passing, as the dust settles on Wall Street, the hope is that stock markets will acclimate to the new situation. The Fed and Treasury Department are taking unprecedented moves to protect America’s financial stability, but we still may have a few storms to weather.

Looking back to the immediate aftermath of the 9/11 attacks on America, stocks plummeted then even more than they did this week. Still, it only took 53 days for the markets to recover back in late 2001. Our financial system may be taking a beating right now, but I would argue that 9/11 was potentially a bigger blow than today’s financial woes. Despite this week’s scary headlines, I’m confident our financial system can recover quickly.

Let’s hope for the best.