Should we be calling the deal to extend the tax cuts a "stimulus package?"

Marketplace Staff Dec 7, 2010
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Should we be calling the deal to extend the tax cuts a "stimulus package?"

Marketplace Staff Dec 7, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: Now let’s get to the deal that was worked out in Washington on extending the Bush Tax cuts. If the deal survives its trip through Congress the cuts will be extended for all income levels for two years. That’s something Republicans wanted. 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.

Let’s bring in Juli Niemann, analyst at Smith Moore and Company in St. Louis. She joins us now as she does every Tuesday. Good morning, Juli.

JULI NIEMANN: Good morning Jeremy.

HOBSON: So, first of all — there are a lot of tax cuts in this deal that are going to affect just about everyone. Is this a second stimulus package?

NIEMANN: It’s probably the only stimulus package that’s even going to go through Congress. And the stimulus part is the two million unemployed spend everything they make — that’s stimulus. And what they’re going to get is an extension of benefits. So, that’s a positive thing. It’s going to keep more people off of welfare at this point. But is really isn’t going to help the average American that much, simply because it’ll help them only to keep treading water. The average America is still paying down debt, they’re still faced with poor job prospects, and now they’re faced with a huge tax on the consumer and that’s higher oil prices. We’re looking at average price per gallon going up $3 a gallon. It’s already there in California. But this is going to be a steady increase in oil and energy that’s going to be a huge tax to consumers. So it’s going to be offset.

HOBSON: So you’re say the tax cuts — even this social security pay roll tax that will affect just about all of us I think — it’s several hundred dollars a year in our paychecks — you think that’s not going to have a stimulative affect on the economy?

NIEMANN: Not really, simply because it’s going to go into the gas tank while you look for that particular job. The biggest tax on the consumer economy always has been gasoline. And now we’re looking at a steady rise in prices that’s coming from global demand, and that’s the key thing. Everybody’s recovering faster than we are. So the two percent drop in payroll tax — that’s not really going to stimulate job formation. It simply means that they’re not going to lay off as readily as they had in the past. So this is a big stimulus package that will keep us treading water.

HOBSON: Juli Niemann, analyst at Smith Moore and Company, thanks as always for your time.

NIEMANN: You bet.

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