What will the tax extensions do for economic growth?
TEXT OF INTERVIEW
STEVE CHIOTAKIS: To the tax cut compromise that was sent to President Obama’s desk. $801 billion in Bush era tax cut extensions, tax cuts added in and unemployment benefits extended. What could it possibly do for economic growth next year?
Jill Schlesinger is editor at large at CBS/MoneyWatch. She’s with us live from New York as she is every Friday, and today is no exception. Good morning Jill.
JILL SCHLESINGER: Good morning.
CHIOTAKIS: What are these tax cuts projected to do for the economy next year?
SCHLESINGER: Well given the conversations I’ve had with analysts and economists, they’re looking at an additional half to full one percentage point of growth next year in the economy. Now let me put that in perspective. We only grew by 2.5 percent in the last quarter, so if we’re going to get pushed up to 3.5 or even 4 percent next year, that’s a pretty big deal for the economy.
CHIOTAKIS: In proportion, sure. So I’m curious, Jill, ever since this tax deal was announced, we here at Marketplace have covered what it’s done to the bond market. It’s hit bonds pretty hard. Why is that? And how are people affected? Everyday people?
SCHLESINGER: I think that the reason why the bonds really accelerated the sell off was because of that growth. In other words, if the economy is going to grow at a much greater pace next year, then maybe the Fed doesn’t have to expand it’s bond-buying program and an improving economy really makes people start to think about stocks, verses bonds. Well here’s how it really hits your pocketbook, if you look at mortgage rates, they have spiked from a low level of about 4.25 percent for 30 year fixed rate to nearly 5 percent today. On a $200,000 loan, that’s an extra $90 bucks a month. You know what? That could be the difference between a re-fi making sense, and not making sense. On the good side I just want to say that savers will finally start to get a little bit more interest so rising interest rates will finally reward those good-do-bees who’ve been putting their money away all along.
CHIOTAKIS: Alright, Jill Schlesinger, from CBS/MoneyWatch. We do thank you.
SCHLESINGER: Great to be with you.
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