Posted by WARREN MOSLER on September 12th, 2010
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.
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.