Monday, December 6, 2010

President Obama and the G.O.P. Reach a Deal on Tax Cuts, Jobless Benefits, and a 1 Year Reduction in Social Security Taxes

On Monday night, U.S. President Barack Obama announced an apparent agreement with Republicans leaders on a plan extending the Bush income tax cuts for all Americans, renewing jobless benefits for the long-term unemployed, and granting a one-year reduction in Social Security taxes. The deal appeared to resolve the first major standoff since the November elections between the President and the House and Senate Republicans. The agreement also includes tax breaks for businesses that President Obama said would contribute to the economy's recovery from the worst recession in eight decades.

Dr. David Krause, AIM program director said, "President Obama's announcement tonight signified a reversal of his 2008 campaign stance that tax cuts should only be extended at incomes up to $200,000 for individuals and $250,000 for couples. I believe that he is tacting to the middle of the political spectrum - following President Clinton's drift from the left in 1994 following his loss of Congressional control to the Republicans. While Obama opposes the move, something that will alienate the liberal wing of the Democratic party, he realizes that the country is still at a delicate stage of the recovery and he can't afford any economic setbacks that would be blamed on his Administration. The tax agreement is a temporary, two-year extension of cuts at all income levels. It is not permanent and makes the tax cut renewal discussion a major campaign issue for him and the Republican candidate for president in 2012."

For details of the announced agreement go to Bloomberg news at

Dr. Krause continued, "The financial markets tonight responded with slightly higher long-term U.S. Treasury yields in Asian trading. Obama’s announcement of the payroll tax cut by 2 percentage points, also helps provide support for the U.S. economic recovery which has been gaining steam the past several months. With fewer Americans filing claims for unemployment insurance payments and consumer confidence on the upswing, Obama could not risk anything that could untrack the recover. This ends up being a good compromise for the U.S. economy - maybe this is the beginning of some form of bipartisanship in Washington. One can only hope we will next see politicians working to control the federal deficit."

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