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Obama’s "stimulus" is really a delayed tax hike, says analyst

Marketplace Staff Dec 13, 2010
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Obama’s "stimulus" is really a delayed tax hike, says analyst

Marketplace Staff Dec 13, 2010
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TEXT OF STORY

JEREMY HOBSON: Now let’s turn to that tax cut deal. Julia Coronado is chief economist with the investment bank BNP Paribas, and she joins us now live as she does every Monday. Good morning.

JULIA CORONADO: Good morning.

HOBSON: So Moody’s obviously doesn’t think the deal’s positive effects on growth will outweigh it’s negative effects on the deficit. But a lot of people are starting to call this tax cut deal a stimulus package. What’s your take?

CORONADO: I think it’s not mainly a stimulus package. Keep in mind that the extension of the Bush tax cuts are just a postponement of a tax hike, it’s not real stimulus. So it’s not something that’s going to boost growth terribly. So my overall estimate is that we’re going to get about a quarter to maybe half a percentage point on growth, from the package. That’s coming from the payroll tax cut and the extension of unemployment benefits. Even a lot of that is going to get saved. Middle and high earners are still trying to restore their saving. And even low earners are going to face higher food and energy prices, which are going to sap some of the strength of the package.

HOBSON: Alright, Julia, also this week — the President is meeting with corporate CEOs. He’s trying to make nice with the business community. How much of an uphill battle does he have on that front?

CORONADO: It’s a pretty steep hill. The relations have been very poor over the last couple of years. The President’s made some concessions recently and everybody can get together and have a nice lunch and sing Kumbaya but ultimately a lot of the regulatory issues and the tax issues that are looming ahead of us are going to keep those relationships very strained in the next year.

HOBSON: Julia Coronado, chief economist at investment bank BNP Paribas, thanks so much for joining us.

CORONADO: My pleasure.

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