A Second Stimulus

[babylonsister]

http://economix.blogs.nytimes.com/2010/12/06/a-second-stimulus/

A Second Stimulus
By DAVID LEONHARDT


The apparent deal over the Bush tax cuts highlights why the Democrats probably had to accept the extension of all the Bush tax cuts. No politician is likely to use this word — at least no Democratic politician — but the deal amounts to a second stimulus bill.

Consider the following two situations:

1. President Obama and Congressional Democrats refuse to extend the tax cuts on income above $250,000. Congressional Republicans refuse to extend any tax cuts unless all cuts are extended. So all of the Bush tax cuts expire on Dec. 31. Congress and the White House spend weeks or months fighting over the issue, accomplishing little else and potentially damaging consumer confidence and business confidence. Eventually, the two parties come to some kind of compromise. It restores most, but not all, of the tax cuts. The cost to the budget — that is, the amount of money pumped into an ailing economy — is about $400 billion over two years.

2. What actually seems to be happening: Democrats and Republicans agree to extend all the tax cuts and also agree to an extension of unemployment benefits, a cut in the payroll tax and, according to my colleagues, “continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.” The amount of money pumped into the ailing economy: about $900 billion over years.

Subtract the $400 billion cost of the Bush tax cuts. Subtract another $140 billion or so, which is the cost of extending the Alternative Minimum Tax patch (and almost certainly would have happened regardless). You’re then left with more than $300 billion in net stimulus over two years. And while that sum will not be enough to fix the economy all by itself, it is serious money. The original stimulus bill cost about $800 billion, and most of the money will have been spent in the first two years after its passage.

This deal looks an awful lot like a second stimulus.

None of this is meant to wave away the failure by Mr. Obama and other Democratic leaders to take action on the Bush tax cuts earlier. The Democrats did not need to be in this position. But the outcome is not all bad, especially for the short-term sake of the economy.

[dkf]

1. Yikes...if the Repubs get ahold of this characterization it will fail for sure.

[Honeycombe8]

2. Clever spin. Doesn't work on me, but maybe some others will bite. nt

[MannyGoldstein]

3. A second (mostly) trickle-down transfer to the wealthiest Americans

Because if we give money to the rich, they give all of it - along with some extra - to the rest of us. Didn't Reagan prove that?

[jaxx]

4. I am reading this other places too, it's definitely stimulus.

The President knows that this is the way to get jobs. Sticking his fingers in his ears and wagging them would do nothing for anyone. I think he made a good deal.

K&R

[dkf]

5. I'm beginning to realize Obama just pulled one on the Repubs

If he had asked for another stimulus he would have been laughed out of town.

[niceypoo]

6. A turd with a smiley face drawn on it

Stimulus ransom

[Donnachaidh]

7. lipstick on a pig

spin spin spin. :eyes:

[cilla4progress]

8. HelLO

What about the $700BIL hole in the deficit? Is that stimulative? Maybe we don't care about the deficit right now...maybe we shouldn't, and maybe that's consistent with stimulus?

Oy - head hurts!

[andym]

9. Just not an efficient one. nt.