How does extending tax cuts and jobless benefits affect the deficit?
President Barack Obama at a town hall meeting.
TEXT OF INTERVIEW
JEREMY HOBSON: President Obama has reached a deal with Republicans to extend the Bush tax cuts that were set to expire this month. If the deal survives its trip through Congress the cuts will be extended for all income levels for two years. In exchange, the President will get some of what he wanted: an extension of unemployment benefits for 13 months and a one year cut in the amount of taxes workers pay into the social security fund.
For more on all of this let's bring in Diane Lim Rogers, she's chief economist at the Concord Coalition. She joins us now live. Good morning Diane.
DIANE LIM ROGERS: Good morning Jeremy.
HOBSON: So let's start with what this means for individuals. What do you think?
ROGERS: I means all American individuals are going to see pretty substantial tax cuts in the coming year. They get some continuation of the Bush tax cuts, they get a payroll tax holiday -- two percent of their income, and those who are unemployed will continue to receive unemployment benefits. So a lot of tax cuts and a lot of help will be coming from the federal government.
HOBSON: A lot of tax cuts for individuals. Some are already calling this a second stimulus package. What does it mean for our economy?
ROGERS: It is another boost of stimulus. I've seen an estimate that the packages is going to cost about $700 billion a year. We seem to like that figure. Our stimulus has been that size before, so it is like a second round of stimulus. I think it would've been better if we had swapped some of the elements of the Bush tax cuts that were less effective for these new elements that are more effective, but it is going to be a helpful boost to the economy, certainly in the short term.
HOBSON: And it's obviously going to mean a lot less revenue coming into the federal government. Quickly, Diane -- what does it mean for the deficit?
ROGERS: It means we're obviously adding hundreds of billions of dollars more in debt. We have deficits against this package or that's the plan. And so we're going to need to in the next couple of year before this round of the Bush tax cuts expires, we're going to need to find more fundamental tax reform to replace the current system. And we're going to need to find a way to raise more revenue.
HOBSON: Diane Lim Rogers, chief economist at the Concord Coalition, thanks so much for your time this morning.
ROGERS: Thank you.