Maynard at Creative Destruction has the optimist’s take on the reported tax cut deal:
[T]he deal supposedly struck between Obama and the Republicans is not too bad and better than was to be expected. We give the rich about $60 billion a year, and in return get about as much economic stimulus, focused on low- and moderate-income people, as we could hope to get.
I observe that the Republican positions include permanent extension of all Bush tax cuts, permanent repeal of the estate tax, and no (or no net stimulus from) UI benefits. So I tend to agree. The best policy and politics would have been to allow the Bush tax cuts to expire and force their replacement with something that was less damaging to the government’s long-term finances, but as long as I’m dreaming I might as well ask for a pony.
What would solidify my position would be news of associated side deals for (a) a suitable increase in the debt limit, since it’s clear that deficits really don’t matter (certainly in the near term), (b) no government shutdown in the next Congress, and/or (c) no fair doom-mongering any cashflow shortfall for Social Security due to the payroll tax holiday. Did I mention that pony?
I’m eagerly awaiting the word from “fiscal conservatives” that extending tax cuts will lower the deficit, with historical referents as justification. I’m also waiting for Obama to declare his Capitulation as a sound economic decision.
We already know that tax cutters will make whatever argument is expedient. As for Obama, the bulk of the cost is in the “middle-class” part of the tax cut renewal — that was Obama policy from the get-go and so its implementation is not capitulation. Extending the estate tax, even with relatively favorable parameters, was not Republican policy and so getting different parameters cannot be said to be a capitulation. Extending UI is a sound economic decision. While a $60 billion giveaway to the rich may be a high price it has to be weighed against the hardship the opposition was willing to inflict on the long-term unemployed (and other people who’d become unemployed as a result).
i continue to be astonished that economists don’t recognize the payroll tax holiday as death to social security.
As recent history shows, rescinding a tax holiday, even on the wealthy, is almost impossible; how will we stop a tax break that benefits a majority of americans ?
and if the holdiay continues, ss funding is in real trouble; if made up from general funds, this breaks part of the “compact” ss is not transfer well fare but a pay as you go, as understood by the genreal pulic (who also seem to have a better grasp of colloquial english then most tenured bloggers; ponzi means fewer workers today supporting more retirees; the proper response has something about productivity in it)