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Thread: Obama Plan Would Boost GDP, Economists Say(edited)

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    Re: Obama Plan Would Boost GDP, Economists Say(edited)

    Quote Originally Posted by Goldenboy219 View Post
    I do however agree that tax cuts, in and of themselves, are a piss poor way to stimulate aggregate demand when society is indebted. Which is why thousands of public works projects are > tax cuts at this time.
    That is true, but it's also true that tax cuts are the only form of stimulus that republicans understand, so it's about the only realistic option that Obama has. Obama is also doing it the right way -- delivering the payroll tax cut in weekly installments -- so you don't have the windfall problem. The down side to that, of course, is that you don't get the same political boost as you wood if you delivered the benefit in the form of a single check (see Bush rebate).

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    Re: Obama Plan Would Boost GDP, Economists Say(edited)

    Putting aside the issue as to the merits of the proposal's provisions, the President's announced outline for paying for the program makes it unlikely that Republicans will support the program. CNBC reported:

    President Obama is proposing to end several tax provisions—including tax breaks for those earning more than $200,000 and the carried-interest tax break for hedge funds—in order to pay for his $447 billion job-creation package, the White House said Monday.

    The tax breaks to be ended, including those for oil and gas companies, will total $467 billion, White House Budget Director Jack Lew told reporters.


    Congressional Republicans had overwhelmingly rejected such tax changes in the past. As a result, Republicans are not likely to accept the proposal as it has been outlined (some provisions could be adopted on their own merits e.g., extension of the unemployment benefits). Moreover, some Republicans might be even more strongly against it, as they could view the proposal in terms of being asked to adopt a measure that the President wants and, at the same time, swallow a political poison pill (violation of their pledge to ATR not to raise taxes) as the price for doing the President a political favor.

    IMO, if the President wanted this package adopted, the proposed means of paying for it undermines prospects of the package's adoption. If, however, the President seeks to launch a broader policy fight in the run-up to the election, the package offers just such a mechanism for sparking that battle. If, in fact, the policy battle is the aim, that approach carries risks e.g., if the nation's unemployment rate does not decline or show signs of declining materially as the November election rolls around, voters could still deny the President a second term. My guess is that the President's aim is the former and, unfortunately, it provides a fresh illustration of how the political leaders are essentially talking past one another rather than trying to find common ground and leverage that area of agreement to build constructive policies.

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