For Obama, Tax Deal Is a Back-Door Stimulus Plan

[pinto]

One more analysis for the mix, economic and political, short and long term ~ pinto

For Obama, Tax Deal Is a Back-Door Stimulus Plan

By DAVID LEONHARDT
December 7, 2010

A year ago, President Obama and the Democrats made the mistake of assuming that an economic recovery was under way. This week’s deal to extend the Bush tax cuts shows that the White House’s top priority is avoiding the same mistake again — even if it has to upset many fellow Democrats in the process.

Mr. Obama effectively traded tax cuts for the affluent, which Republicans were demanding, for a second stimulus bill that seemed improbable a few weeks ago. Mr. Obama yielded to Republicans on extending the high-end Bush tax cuts and on cutting the estate tax below its scheduled level. In exchange, Republicans agreed to extend unemployment benefits, cut payroll taxes and business taxes, and extend a grab bag of tax credits for college tuition and other items.

For the White House, the deal represents a clear shift in policy focus. Mr. Obama and Democrats spent much of the last year pursuing long-term goals like a health care overhaul and financial regulation, while hoping the economic recovery would continue. But with the recovery faltering and Republicans retaking the House, the administration is turning back to short-term job creation.

<snip>

And left-leaning policy experts said the package did more to create jobs than they had thought possible after the Republicans’ midterm election victories. Robert Greenstein, Lawrence Mishel and John Podesta — who run prominent Washington research groups that range from liberal to staunchly liberal — all offered praise for the package. Of its estimated $900 billion-plus cost over two years, roughly $120 billion covers the high-end tax cuts and the estate tax cut, $450 billion covers Mr. Obama’s wish list and $360 billion covers the tax cut extensions both parties favored.

<more analysis at>

http://www.nytimes.com/2010/12/08/business/economy/08leonhardt.html

[Cirque du So-What]

1. Makes sense

How can extension of the tax breaks be viewed as anything BUT a stimulus to the economy? Lots of middle-class people were dreading what would have amounted to a large tax hike in less than a month. Resumption of unemployment benefits are nothing less than a lifeline to the long-term unemployed. It amazes me that some people are willing to play fast-and-loose with people's lives for the opportunity to beat their chests in victory. It doesn't seem very 'humanitarian' to take those chances - and it sure doesn't jive with my concept of 'far-left' either. If they believe in confrontational politics that could wreck the lives of some very vulernable people and further decimate the middle class, they can't expect widespread support - only bewilderment and anger at such a seemingly sociopathic attitude.

'If you go carrying pictures of Chairman Mao, you ain't gonna make it with anyone, anyhow.'

Get a grip!

[JohnWxy]

4. Let's not twist reality too fucking much here...as if REpubs give a fuck about the unemployed.

"It amazes me that some people are willing to play fast-and-loose with people's lives for the opportunity to beat their chests in victory"

IT's the REpublicans who have fought EVERY unemployment extension bill the DEMOCRATS have introduced since the disaster the Republicans created. The Democrats are the one's fighting for this lifeline which was made necessary by Republican policies of shifting the tax burden more to the middle income people and off the wealthy. Along with their anti-regulation obsession ("the Market will police itself"__Alan "Mr. Magoo" Greenspan) that's how we got the Housing Bubble and the Credit Catastrophe which lead us into this REPUBLICAN DYSTOPIA.

The REpublicans are COUNTING ON Democrats compassion for people and their sense of fairness to enable them to gain extended tax cuts for those who will spend only a small amount of them (BTW the difference were talking about here is 39% compared to 35% for the top bracket). IF Republicans were really concerned about the deficit they would not be threatening to kill the Unemployment Benefits extension (which would also kill off the recovery) to gain these Deficit Boosting minimally stimulative tax cuts for the wealthiest taxpayers. That money is be much better spent, in terms of stimulus, in unemployment extensions.

The reality here is the REpublicans know they can get the Dems to grudgingly agree to tax cuts to those who are not going to spend them anyway, because the Dems will fold to keep the Unemployment Benefits going. IT's only because the Dems CARE about the welfare of people who are out of work through no fault of their own, that the REpublicans know this "gun to the head of working people" tactic will work. Republicans have a long, well established record of sociopathology. Twisting reality into the reversed image of itself will not change that.

Republicans have no philosophy, only tactics__ Reality 101 (prereq. non paranoic conservative frame of mind)

[northernlights]

5. tax cuts, especially to the uber-wealthy, do not stimulate the economy.

Otherwise, the economy would be booming thanks to the original gift of those tax cuts under W.

[Cirque du So-What]

6. I'm not counting the tax cuts for the idle rich, which are a bad investment

but the extensions to unemployment will certainly stimulate the economy, and so will the continued cuts for the middle class (to a lesser extent). To my way of thinking, it's more important to help the long-term unemployed and keep more money in the pockets of the middle class than to throw the baby out with the bathwater over the extension of tax cuts for the wealthy. A 'moral victory' is cold comfort to someone who can't afford to put food on the table.

[JohnWxy]

7. The Repubs know there is no chance the Dems will let Unemployment Benefits die. That's why they are

holding a gun to the heads of the unemployed to get the Dems to agree to tax cuts for those above $250K.

BTW, Dems made an attempt to compromise by allowing tax cut extention to include those with incomes up to $1,000,000. Repubs didn't bite. Of course not, they want to win a political point...they don't give a fuck if Unemployment Benefits stop. But the Democrats do.

[FloriTexan]

10. True, but

it would be a double whammy to the unemployed to raise taxes and end their unemployment benefits. That's what my family would be looking at.

[Fearless]

12. And before that you get 4 million people rioting peacefully up and down Wall St.

That's how you get attention.

[Fearless]

11. +10000

[FloriTexan]

9. Thank you! n/t

[frylock]

2. so then that means that the bush tax cuts did stimulate the economy!

good news everbody!! you aren't really jobless after all!

[JohnWxy]

3. MOODY's Analytics recent study shows how tax cuts for high earners provides minimal stimulus while

adding to deficit. In other words its a very expensive way to gain stimulus. the NYT article didn't dwell at all on how nobody considers tax cuts to the wealthy very stimulative while being costly in terms of increasing the deficit.

Moody's Analytics recent study shows how costly tax cuts to high earners is, especially compared to unemployment insurance extension:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x574206

■ Short-term scenarios: Zandi found that extending federal UI for one year and some of the Obama tax cuts (expansion of the child tax credit, improvements to the earned income tax credit, and the higher education tax credit) for two years would generate more economic activity — including creating 500,000 more jobs next year — than would a two-year extension of the Bush high-income tax cuts. It would also add $30 billion less to deficits over the 2010-2015 period than extending the high-income tax cuts would.(my emphasis__JW)


...the payback for tax cuts for those making $1,000,000 a year and more is extrememly small, just because its vey hard for people making this much money to spend as big a proportion of their income as the average person (avg income U.S. ~$49K,(pre 2001 it was ~$50K)).

[lame54]

8. perfect title...

but I don't need my back door stimulated

Bush has me bleeding out the ass as it is

[Doctor_J]

13. Yep, feeling something at the "back door" alright

when the fuck can we start the revolution?