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Zandi Analyses Show "Democratic" Measures in Tax Cut-UI Deal Boost Economy, "Republican" Measures Add to Deficit Risks
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| Contributor | ArmyDem |
| Last Edited | ArmyDem Dec 26, 2010 12:12pm |
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| Category | Analysis |
| News Date | Wednesday, December 22, 2010 06:00:00 PM UTC0:0 |
| Description | By Hannah Shaw and Chad Stone
December 22, 2010
As a result of the tax cut-unemployment insurance legislation that President Obama signed into law last week, economic forecasters have substantially upgraded their outlook for 2011 (see the box on page 2). An analysis of the compromise by Mark Zandi, the chief economist for Moody’s Analytics, indicates that this greater optimism stems largely from the longer extension of federal emergency unemployment insurance (UI) programs than forecasters had expected, the extension of various improvements enacted in 2009 in several tax credits for low- and modest-income families, and a reduction in the payroll tax. By contrast, the extensions of the upper-income Bush-era tax cuts and a substantially weakened estate tax will provide little or no boost to the economy in the short run; moreover, those extensions increase the risk that such measures will ultimately be made permanent and thereby deal a setback to efforts to restore long-run fiscal balance.
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* Zandi also finds that what he terms the “Democratic Proposals” in the package — the 13-month extension of UI benefits (Moody’s pre-compromise forecast assumed only a three-month extension), the extension of various refundable tax credit improvements enacted in the 2009 Recovery Act, the reduction in the payroll tax, and the “expensing” provision for businesses — account for 1.1 percentage points of the 1.2 percent boost to real economic growth in 2011, 1.4 million of the 1.6 million-job increase in payroll employment, and 1.1 percentage points of the 1.2 percentage-point reduction in the unemployment rate.
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