There's a hidden tax increase in the deficit deal, and no one is talking about it. The President and Congress agreed to leave the extension of the payroll tax holiday, and the extension of unemployment benefits, out of the deal. According to a top economist at JP Morgan, dropping the extensions, in addition to the cuts already in the deal, means a 1.5% point hit to economic growth next year.
Obama and congressional Democrats say they will fight to extend the payroll tax cuts and unemployment insurance. The measures provided $150 billion of economic stimulus in 2011. Their expiration would represent a far greater drag on economic activity than the spending cuts proposed for 2012. J.P. Morgan Chase estimates that it would, in combination with cuts, trim 1.5 percentage points from economic growth next year.Most of the analysis you're seeing on the deal is only talking about what's IN the deal, not what was left out. So everyone is saying how "no taxes were raised," and how the deal may shave "only" 0.2% points off of growth next year, which is still a lot when you're dancing on the edge of another recession:
The budget deal tries to address these concerns by keeping spending cuts relatively modest at first — about $25 billion in 2012 and $47 billion in 2013 — before making much deeper reductions in the following eight years.
But these cuts will still have an impact, trimming 0.2 percentage points from economic growth next year, according to IHS Global Insight, an economic research group. That could be significant in an economy that grew only 1.3 percent in the spring, not enough to generate many jobs.Ironic that the only taxes raised in the deal are on workers.
The phasing out of the payroll tax holiday and the unemployment benefit extension will remove six times as much money from the economy next year as the cuts programmed into the deal itself. That's huge. And conveniently for Republicans, could destroy a lot of jobs right before the election. But the administration says they're going to keep fighting for the benefits and payroll tax holiday extensions.
Right.
Assuming they actually do "fight" for it, we know from experience that they'll give up ten times as much to the Republicans in return. So what outrageous demands will we cave on next time in order to stop the Republicans from sending the US and world economy into another Great Depression?
Is it not time for our leaders to call the Republicans out on their economic terrorism? The Dems like to tell us that they didn't have a choice, that this is the best they could do. That's bull. When the other guy puts an economic gun to the head of every American, you call him out on it. You embarrass the hell out of him. You paint him as the extremist he has finally revealed himself to be.
What you don't do is whine about how powerless you are when you control both the US Senate and the White House. Either you don't know to lead, or you supported the GOP proposals from the beginning and were happy to have them in the final deal. Neither is a very good argument for being re-elected as a Democrat.
