Word out today is that there are many in Congress who are mbilizing to derail the tax deal announced last night by president Obama. Many Democrats are incensed that the wealthy will be given what they portray as a "tax cut" even though the rates next year will be the same as this year. They also dislike the idea that Obama called the payroll tax reduction a stimulus, when only government spending qualifies as stimulus in their book. Among Republicans, there are those like Michelle Bachmann who are upset that the extension of unemployment benefits is not being paid for by reductions in other spending. Others decry the very idea of any compromise with the Democrats (sort of the mirror image of what MSNBC is saying.)
In my view, these folks are either posturing or they are fools (or both). Under the deal, tax rates will not be raised during these bad economic times, thereby avoiding the drag on the economy that would necessarily follow. There will be a stimulus to the economy that, unlike the direct government spending, should actually work. Individual people will be able to determine how to spend their own money, and this will give the most efficient possible boost to the economy. Unemployment will be extended to 99 weeks for those who might otherwise have lost those benefits, although those already at 99 weeks will not get further benefits. This too will prevent an immediate drag on the economy. The estate tax will return, but it will be lowered from the draconian levels that would have prevailed without this action.
The net effect of the deal should be to promote the growth of the economy and of jobs. Indeed, if this type of plan had been structured in 2009 instead of Obama's misguided stimulus bill, there might be many more jobs in the economy today. Hopefully, the bill will still pass and will work to create a virtuous cycle that will lead to jobs then growth then more jobs and then more growth, etc.
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