The future is uncertain. That may always be the case, but getting down to specifics Congress has passed the $858 billion tax cut bill. No one knows what the effects of the legislation will be, and those effects may never be clear-cut enough to allow for an obvious conclusion either next year or ever.
The legislation includes $801 billion in tax cuts and $57 billion in extended unemployment benefits.The Senate approved the package by 81 to 19. The final vote in the House was 277 to 148. Members of both parties cast ballots based mostly on their concern about the economy and the wrath of their constituents. Tax cuts are nearly always a path to voters ‘ hearts.
All the Bush tax cuts will be extended for two years. Many workers will get a single-year payroll tax benefit. One million or more Americans who would have become destitute will have unemployment insurance for as long as 13 months.
It is notable that there is still no verdict about what the Bush tax cuts did for the economy originally. They certainly did not prevent a deep recession. Some economists might make the case that the catastrophe could have been worse, but that is nothing more than conjecture.
The fact that the extremely wealthy will not pay more to the Treasury is the main headline in most of the media. Why should the rich not carry a larger burden to cut the deficit? The major real reason is that the rich benefited from a horse trade to get better tax treatment for the middle class. A tax on high income probably would not have done much to close the deficit, which will be above $1 trillion in the current federal fiscal year.
The president’s original budget and the CBO analysis of that budget did not contemplate a large tax cut two years when they were authored. That means the data about national deficits and national debt are no longer valid. The budgets and their forecasts will need to be entirely reset to estimate how the economy will perform.
It has been said too often to mention that tax cuts should stimulate consumer and business spending. But, tax cuts have never come on the heals of a recession as deep as the one just past. Individuals and corporations may save the money that the tax cuts “give” them to lower debt and prepare for another possible economic downturn. The irony of that is if the money is not spent, the chance of a downturn increase, probably sharply.
Congress and the Administration might have been better off to say that people and companies could enjoy tax cuts if they could prove that they spent the money the tax package gives them. That would make too much sense.
Douglas A. McIntyre