Bush tax cuts expected to be a hot topic

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TEXT OF INTERVIEW

JEREMY HOBSON: The results are still coming in from yesterday's election, but we do know that Republicans will control the House of Representatives and Democrats will continue to control the Senate. That'll have an immediate effect on the debate over whether to extend the Bush Tax cuts which expire at the end of the year.

For more, we're joined by live Mark Zandi. He's chief economist at Moody's Analytics and was an economic adviser to John McCain's 2008 presidential campaign. Good morning, Mark.

MARK ZANDI: Good morning.

HOBSON: Well first on the tax cut issue. The Bush tax cuts are set to expire at the end of the year. Democrats had wanted to extend them only for those making under $250,000. Republicans wanted to extend them for everyone. What happens with that debate now?

ZANDI: I think there will be a compromise. I think in all likelihood no one's taxes will rise in 2011, but those higher tax rates for upper income individuals will be phased in beginning in 2012 and into 2013 so. I think they'll find a middle ground.

HOBSON: Alright now the other thing is a lot of people that we've been speaking to over the last few days have been saying that a divided government is good for business or at least business likes divided government because it means there won't a whole lot of new regulations to deal with. What's your sense on that?

ZANDI: I think that's correct. There are pluses and minuses and one of the big pluses is that we'll a bit of a policy time out -- no major economic policy decisions will be made and that'll give businesses a chance to digest all the epic policy changes that have occurred over the past couple of years. You know, obviously health care reform and financial regulatory reform being at the top of the list. And until a lot of t's are crossed and i's dotted I think businesses are going to be reluctant to go out and invest in hiring. This will give them a change to get clarity and hopefully begin to hire more aggressively.

HOBSON: And quickly Mark, the minuses?

ZANDI: Well the key minus is that if the economy starts going south -- we go back into recession. It's going to be very difficult for a divided government to come to some compromise to address that weakened economy.

HOBSON: Okay Mark Zandi, chief economist at Moody's Analytics, thanks so much.

ZANDI: Thank you.


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