News Column

Obama Says Tax Cuts Positive for Americans, Economy

December 8, 2010
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U.S. President Barack Obama Tuesday defended his stance that a compromise on extending the soon- to-expire Bush-era tax cuts was conducive to Americans and the U.S. economy, while experts believe this framework has its shortcomings and the debate would continue.

TENTATIVE FRAMEWORK

Obama announced on Monday evening that the White House and Republicans had reached a compromise that would extend the soon-to- expire Bush-era tax cuts at all income levels for another two years, while extending emergency jobless benefits through 2011.

Obama said on Tuesday that his priority was "getting the economy moving and spurring job creation" and this was in line with his 2008 campaign promise to protect the middle class from a tax increase.

He noted that he did not want American people to be hurt "with political fight going on," and this compromise was a "good deal" for Americans.

Obama believed that the deal with Republicans was not perfect, but it was better than a stalemate that would lead to higher income taxes for the U.S. middle class since the start of next year.

He predicted that the U.S. unemployment would go down without a tax spike, and it would help stimulate consumption and the economy.

The U.S. unemployment rate edged up to 9.8 percent in November, while non-farm payroll employment was little changed from the previous month, according to the U.S. Labor Department figures.

DISPUTES WITHIN DEMS

The framework agreement between the White House and the GOP had sparked concerns and criticism from some leading congressional Democratic leaders, who held that Obama's conciliatory moves gave an olive branch to the GOP too quickly.

Democrats previously intended to extend the tax cuts only for individuals making less than 200,000 dollars and married couples making less than 250,000 dollars each year, not including the richest American taxpayers.

"We will continue discussions with the President and our Caucus in the days ahead. Democratic priorities remain clear: to provide a tax cut for working families, to promote policies that produce jobs and economic growth, and to assist millions of our fellow Americans who have lost their jobs through no fault on their own," said House Speaker Nancy Pelosi.

Senate Majority Leader Harry Reid noted the deal was not yet completed and more work needs to be done.

Analysts hold that the two parties and the White House would continue discussing this issue in the coming weeks to finalize a deal for the Congress to pass.

PROS AND CONS

Experts noted that a bipartisan compromise with the Republicans would help Obama win more support from independent voters. Moreover, although the plan might harm the long-term national deficit cut goal, it might help bolster a nascent economic recovery and reduce the unemployment rate in the next two years, which is crucial to Obama's re-election prospects.

"This is good news for investors, entrepreneurs, small business owners, and other rich taxpayers. This probably won't have a positive effect on economic performance since current policy will continue, but at least it delays anti-growth policy for two years," said Daniel Mitchell, a senior fellow at the Cato Institute.

However, Mitchell added, the burden of government spending is going to increase. "A rising burden of federal spending is America's main fiscal problem, and this agreement exacerbates that challenge," he said.

Other economists argue that paying people to remain out of work has a negative impact on their willingness to work and the employment rate.



Source: Copyright Xinhua News Agency - CEIS 2010


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