7

Does the economy need more stimulus?

Tax forms.

TEXT OF STORY

UPDATE 9:46 p.m. PT: At midnight tonight the House voted to approve the tax bill 277 to 148. Among Democrats, 139 voted in favor of the measure, 112 voted against it. Meanwhile, 138 Republicans voted to pass the measure, 36 were opposed. The $858 billion package now heads to the President for a signature as soon as Friday.

Kai Ryssdal: Here's where we are on the House vote on the tax package. We're waiting. Biding our time. Hanging around while House Democrats argue -- mostly with each other -- over how to deal with the estate tax.

When the vote does happen -- and most everybody does expect the deal to pass -- we'll finally get a chance to see whether the economy really needed to be stimulated with more borrowed money. Our Washington bureau chief John Dimsdale has the latest.


John Dimsdale: The compromise keeps income and business taxes where they've been the last 10 years. It's also designed to jumpstart the economy with a year-long 2 percent cut in Social Security payroll taxes, and companies also get a write-off new plants and equipment. President Obama says these tax breaks are necessary.

Barack Obama: I'm absolutely convinced this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector.

But the economy is showing fragile signs of a turnaround. Does it really need more stimulus? Or could the extra injection of government cash overshoot the mark and stoke inflation? Moody's Analytics economist Mark Zandi says there's a small chance of that. But he says the alternative, raising tax rates on all Americans, would be worse.

Mark Zandi: If we go back into recession, it's going to be a world of hurt. There's no policy response to that. Our deficits would balloon out. So it's prudent to err on the side of perhaps doing too much rather than too little.

The tax compromise also adds hundreds of billions to the deficit. And some question whether temporary tax breaks deliver much bang for those bucks. Gerald O'Driscoll is a former vice chairman of the Dallas Federal Reserve Bank. He says the payroll tax reduction will hardly be noticed.

Gerald O'Driscoll: Because people know they're temporary, they know they're transitory and they're going to save most of it.

And if Congress finds it difficult to let the payroll tax holiday end next December, O'Driscoll says the revenue loss will have real consequences for Social Security's solvency.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
Log in to post7 Comments

The further we get from 2008, the more I think, My how far we've come, and accomplished so little.

I hate how "comprimise" in D.C now means tax less, spend more, borrow till insolvent.

Most Americans have lost the ability for long term abstract thinking. America is based on what was once a remarkable social contract. Each person is equal and has inalienable rights, the privileges of Aristocracy where thrown out in America for equality: One man One Vote. Our government assumed the right of life liberty and the pursuit of happiness applies equally to all citizens. This was our social contract.

Entrenched wealth and dynastic fortunes are the antithesis of an equal playing field for all men. This means our government wealth must be shared, and must be progressive for taxation and inheritance to counteract the natural return to a dynastic Oligopoly. Teddy Roosevelt championed this and this was the purpose of progressive taxation and the inheritance tax.

For each $100,000 this tax bill gives a person in the top 1% income bracket. It returns about $600 for the average worker. Long term this will further stratify income and continue to destroy the middle class. The Rich will continue to loot the incredible wealth of America.

For one year America will feel better and the average worker will get from the politicians a new TV bought from our rich corporations that manufacture and ship the TV from overseas and pay overseas workers. Our votes and the future of America were bought for a paltry amount. 10 years from now our TV’s will go bad and we will have a much smaller share of America.

I think the poor John Dimsdale has been spending too much time in Washington D.C. as he's fallen into the inside the Beltway trap about taxes. In yesterday's report on the tax cut bill moving through Congress, he referred to the plan as "an extra injection of government cash". John, the money in the tax bill isn't "government cash" its my cash.

We might need smarter stimulus, but we don't need more stimulus. Stop the debt spending!

It's a bit late to be asking whether "government cash" can help the economy. Anyone with common sense knew that it couldn't two years ago before the first alleged stimulus started, and history has proved us right. The only way for the government to stimulate the economy is to *get out of the way* and let people *keep their own money*. It's not the government's money, it's *ours*.

JUST SAY NO! - Don't sell our future to benefit the rich.

Most Senators and many Congresspersons
are millionaires. How much will
each of these leaders and their
families gain personally from these
new policies.

After all, that's how countries decline
and become 3rd world : their leaders
borrow money and use it to line their
pockets and those of their cronies.
Then the bill comes due, vital services,
infrastructure and investment in the
Nation's future are cut, opportunities
wilt, people become poor. As a result
society becomes even more corrupt, since
working hard offers diminishing opportunities and people follow the
example of their leaders. Income
disparity increases, empathy decreases.
Leaders tax the middle class and poor
more and more and give them fewer and
fewer services and protections.
Those that remain are chronically
underfunded, and often corrupt.
To enforce this new cruelty, the
nation further degrades fundamental
freedoms, increases monitoring of
its people and makes punishment more
draconian. And there you have it -
decline, corruption, injustice,
poverty, inequality, cruelty and the
loss of our democratic society as
we know it - a ticket to becoming
3rd world.

JUST SAY NO!

With Generous Support From...