Obama’s September surprise?

September 1, 2010

A few initial thoughts on Obama considering tax cuts to boost economy (via WSJ story):

1) WH already has broad plans on drawing board for a $200-$300b stimulus plan, half tax cut, half infrastructure. I reported this a month ago.

2)  Payroll tax cut is not a bad idea for stimulus, but U.S. has longer-term job and growth problem that needs to be addressed.

3) Payroll tax cut for $400 billion in early 2009 would have been better than Obama’s $862 billion plan.

4) Any short-term tax cut should be coupled with long-term deficit reduction plan.

5) A really bad payroll number on Friday could change political dynamic on this.

6) How would this square with WH’s new focus on deficit reduction, the supposed reason why Bush tax cuts on rich should not be extended? Indeed, WH has doubled down on this with adviser Jason Furman making this point yesterday.

7) Here is how one smart Washington observer framed things for me:

If it’s a one-year extension of all expiring tax provisions (including extenders), it would be a very smart political move for him.  He would triangulate his base and appeal to swing indies.  It also undercuts one of the main GOP arguments.  The stock market would surge.  It’s a total no-brainer, unless you are just that ideologically-addled not to do it.

If it’s “tax relief” for non income taxpayers, or tax cuts that are so difficult to qualify for no one bothers (see: small business health insurance credit), it won’t go anywhere and he’ll get no bounce from proposing it. If he wants to use taxes to change the dynamic (or at least blunt the wave), it needs to be bold and he needs to piss off the Congressional leadership.

A one-year extension of all expiring tax relief would probably get 230 votes in the House and 55 in the Senate.  Ask a vulnerable House Dem off the record if he would vote for that, and see how quickly he says, “you bet.”

Update: This from the WH press office: “The President and his economic team are discussing several options to continue on the path to recovery, but any reporting on decisions made or timing is premature.”

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