As previously suggested, Boehner reverses course and does what should have been his obvious choice.

This gives everyone in Congress a pre election window to try to tax cut their way to victory before the election.

With the current level of deficit spending already supportive of modest GDP growth, and these latest developments taking away the risk of fiscal tightening through tax hikes, look for prospects for a double dip to be all but forgotten, and equities to firm accordingly.

In sum, federal deficits are supporting enough income/savings/agg demand for modest gdp growth even with a relatively weak consumer and no credit expansion,
corps have already demonstrated the ability to generate reasonably good cost cutting/profits with very modest gdp growth,
high unemployment keeps unit labor costs under control, and relatively low term interest rates continue to support valuations,
housing can’t go any lower and even if starts doubled they would still be relatively modest,
and same goes for cars and lots of other areas of deferred consumption and deferred investment.

Boehner says he’d support a middle-class tax cut

September 12 (AP) — House Minority Leader John Boehner says he would vote for President Obama’s plan to extend tax cuts only for middle-class earners, not the wealthy, if that were the only option available to House Republicans.

Boehner, R-Ohio, said it is “bad policy” to exclude the highest-earning Americans from tax relief during the recession. But he said he wouldn’t block the breaks for middle-income individuals and families if Democrats won’t support the full package.

Income tax cuts passed under President George W. Bush will expire at the end of this year unless Congress acts and Obama signs the bill. Obama said he would support continuing the lower tax rates for couples earning up to $250,000 or single taxpayers making up to $200,000. But he and the Democratic leadership in Congress refused to back continued lower rates for the fewer than 3 percent of Americans who make more than that.

The cost of extending the tax cuts for everyone for the next 10 years would approach $4 trillion, according to congressional estimates. Eliminating the breaks for the top earners would reduce that bill by about $700 billion.

Boehner’s comments signaled a possible break in the logjam that has prevented passage of a tax bill, although Republicans would still force Democrats to vote on their bigger tax-cut package in the final weeks before the November congressional elections.

“I want to do something for all Americans who pay taxes,” Boehner said in an interview taped Saturday for “Face the Nation” on CBS. “If the only option I have is to vote for some of those tax reductions, I’ll vote for it. … If that’s what we can get done, but I think that’s bad policy. I don’t think that’s going to help our economy.”

Austan Goolsbee, new chairman of the White House Council of Economic Advisers, said on ABC’s “This Week” that he hopes that Democratic lawmakers who also want an across-the-board extension will join Obama and others in the party in supporting legislation aimed at the middle class before the November elections.

In response to Boehner’s comments, Goolsbee said, “If he’s for that, I would be happy.”

With congressional elections less than two months away, both parties have been working to score points with voters generally unhappy with Congress. Democrats are bearing the brunt of voter anger over a stubborn recession, a weak job market and a high-spending government, giving the GOP an opening for taking back control of the House and possibly the Senate.

Democratic leaders would relish putting up a bill that extends only the middle-class tax cuts and then daring Republicans to oppose it. In response, GOP lawmakers probably would try to force votes on amendments to extend all the tax cuts, arguing that it would be a boost to the economy, and then point to those who rejected them.

A compromise over the tax-cut extensions had been suggested by some senior Democrats. In a speech last week in Cleveland, Obama rejected the idea of temporarily extending all the tax cuts for one to two years.

The tax-cut argument between Obama and Republican lawmakers focuses on whether the debt-ridden country can afford to continue Bush’s tax breaks, which were designed to expire next year. Republicans contend that cutting back on government spending ought to be the focus of efforts aimed at beginning to balance the federal budget.

13 Responses

  1. I wouldn’t be celebrating until a bill is signed. “There’s many a slip between the cup and lip.” I would be very surprised if the GOP just caves.

      1. So would we rather have this or nothing. Or how about a compromise, that will probably be best, in increasing the highest bracket from 250k to something higher like 375k or 500k.

      2. I would prefer to see the entire Bush tax cut extended for a year or even two years. Raising taxes when facing down deflation is crazy.

        Who cares how high the deficit goes at this point? It is a meaningless number, with an output gap this large and real unemployment/underemployment in the teens, and with youth and minority unemployment much higher. The present and future losses are already staggering and keep mounting.

        But I don’t agree that the Bush tax cuts should be made permanent. When real recovery arises, and that won’t be until the financial cycle bottoms out and lending starts, then taxes will likely need to be raised gradually to defuse inflationary pressure.

        Moreover, tax policy should also be oriented toward taxing away rent, which is parasitical, and favoring productive investment.

      3. I’d go for that, too. But fat chance. Chances are that the tax cuts will just expire, further crimping demand, owing to gridlock.

    1. I don’t believe this, unless you’re talking about other countries.

      Housing has bottomed. Yeah, the indicies could drop again due to a changing mix of distressed and non-distressed sales, and the distressed houses could continue to decline because of extended foreclosure timelines (meaning the houses are in a state of more severe disrepair), but it wouldn’t be a real drop in market prices. We’ll probably flat line for a while, but the price declines are pretty much over nationwide.

      1. Housing hasn’t bottomed. We have a huge shadow inventory of homes, and rents are still cheaper than homes in many areas. For example, the home I am renting now would cost nearly 40% more to buy with a 20% downpayment.

      2. Can you tell me where you live (roughly)?

        The huge shadow inventory is being managed very well. It will be dribbled out over the next 3 years. That’s why prices will remain flat for quite some time, but nobody is just dumping houses willy-nilly anymore. And there is really a tremendous amount of pent-up demand. The population is growing at >3MM per year, which should translate to >1MM new homes per year, but we’ve been going at 500K new homes per year for quite some time (and this number includes replacing tear-downs).

Leave a Reply

Your email address will not be published. Required fields are marked *