A Few Reactions to the Tax Cut Agreement

Unemployment benefits extended in tax-cut deal – Brushing past opposition in his own party, President Barack Obama announced agreement with Republicans Monday night on a plan to extend expiring income tax cuts for all Americans, renew jobless benefits for the long-term unemployed and grant a one-year reduction in payroll taxes. The emerging agreement also includes tax breaks for businesses that the president said would contribute to the economy’s recovery from the worst recession in eight decades. Obama’s announcement marked a dramatic reversal of his long-held insistence, originally laid out in his 2008 campaign, that tax cuts should only be extended at incomes up to $200,000 for individuals and $250,000 for couples. He explained his about-face by saying that he still opposed the move and noted the agreement called for a temporary, two-year extension of cuts at all income levels, not the permanent renewal that Republicans have long sought.

Austerity delayed – FOR a brief interlude after the mid-terms Americans seemed seduced by the siren song of Germanic austerity. Feeble economy or no, the talk was all of rising taxes, pay freezes and spending cuts. Austerity will have to wait for its turn in the limelight. On Monday Barack Obama and Republican and Democratic leaders in Congress struck a deal on a massive new package of stimulus and tax cut extensions, worth some $800 billion  (around 5% of GDP). Though it must still pass the parties’ respective caucuses, this is good news for the economy: the prospect of inadvertent fiscal tightening was the biggest cloud hanging over the 2011 outlook. The package comes in two parts. The first is an extension of all of George Bush’s tax cuts for the next two years. Mr Obama acquiesced to an extension for the upper 2%, bowing to the reality that he did not have 60 votes in the Senate to extend only the cuts for the lower 98%. Tax credits for child care, education and for low-income wage earners are also extended.

A Few Reactions to the Tax Cut Agreement Brad DeLong: Most of this round of stimulus does look to be relatively low bang-for-buck, and it is not paid for over ten years, but it does look to me as though it is better than a poke in the eye with a sharp stick. Dean Baker: It is important to realize that most of the money in this package is maintaining tax cuts in place that were scheduled to expire. This will prevent tax increases from having a contractionary impact on the economy, however there is very little, if any, net stimulus in this package compared with current levels of taxation and spending. Larry Mishel of the EPI: Who got what out of the deal is clear. The Republicans got tax cuts for the best-off two percent and lower estate taxes for the very wealthiest families, neither of which will do much if anything to create jobs. President Obama won policies that will put or keep money in the pockets of the families of the unemployed and middle and low-income families, which will increase spending and create jobs.

Is The Tax Deal The Ultimate Irony Or Hypocrisy?: After making the budget deficit not just a campaign issue but the campaign issue of 2010, one of the very first legislative things the Republicans in Congress will do after the election is agree to a tax cut and extension of unemployment benefits (and god knows what else) that will…wait for it…increase the deficit.  The two-year increase in the deficit because of the deal will be greater than the stimulus bill the GOP railed against during the election. This is either one of the most exquisite ironies or extraordinary hypocrisies in the history of American politics.  It ranks right up there with Lyndon Johnson campaigning against Barry Goldwater in 1964 by criticizing his plan to increase military activities in Vietnam and then, after the election, having the Pentagon do many of the things he had criticized Goldwater for suggesting.

Growth can’t continue forever in finite world – How dependent are we? The bioenergetics are not good. In nature, if an animal expends more energy to capture food than the food contains, starvation is the eventual outcome. Our contrived food chain uses 10 calories of fossil energy to put one calorie of food on the table. When energy production declines, we can expect food production to decline also. Here is a recent headline from the British newspaper The Guardian: "US military warns oil output may dip causing massive shortages by 2015." See, you don’t need to worry until at least 2015! Economists talk only of growth when what we need is stability and a reversal of growth on an overpopulated, finite planet. Perhaps economist Ken Boulding said it best: "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." Economics is a subset of ecology and nature, not the other way around. It is a biological and geological world, and we need to come to terms with its finiteness no matter how self-congratulatory we are at globalization and at being clever.

Leading in underdevelopment – Every year since 1990, the United Nations has published its Human Development Report,  a comparative survey of the world’s nations and peoples measured not just by income, but  also by education, health, life expectancy, literacy and so on. The report’s narrative focuses primarily on the Developing World; but the statistical underpinning embraces all countries and is presented in the form of a table –  the Human Development Index (HDI)  –  in which each country appears in rank order of developmental success. The different components of the HDI  – income, education, health etc. – are also presented in rank order so that readers can identify how well or poorly countries have performed in these sub-categories. UK readers, however,  regardless of political stripe, may find some of the fare unpalatable. Here’s why.  In the first year of the Report – 1990 – the UK placed tenth overall in human development, behind Japan, Sweden and Canada – amongst others, but ahead of West Germany, Italy, Spain and the USA. Twenty years later, in 2010, we have fallen to 26th position, behind not only these four countries (including a united Germany) but also Israel, Korea, Hong Kong and Greece. Moreover, unlike most of our European neighbours, our relative trajectory has been firmly downward.

WOW – Is Lee County Foreclosure Court Above the Law? This is outrageous! Now a Judge is flat out saying that the Florida Rules of Civil Procedure do not apply! Florida Rules of Civil Procedure 1.510 Summary Judgment e) Form of Affidavits; Further Testimony. Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. Not only does it appear that the judge “withdrew” the defendants motion to dismiss, he flat out tells him the Fla.R.Civ.Pro do not apply in his court… Now check out the order below!

Bernanke Says More Fed Easing Possible With Jobless Rate Set to Stay High – Federal Reserve Chairman Ben S. Bernanke said the economy is barely expanding at a sustainable pace and that it’s possible the Fed may expand bond purchases beyond the $600 billion announced last month to spur growth.  “We’re not very far from the level where the economy is not self-sustaining,” Bernanke said in an interview broadcast yesterday by CBS Corp.’s “60 Minutes” program. “It’s very close to the border. It takes about 2.5 percent growth just to keep unemployment stable and that’s about what we’re getting.”  Bernanke, in a rare appearance on a nationally broadcast news program, defended the Fed’s efforts to prop up a recovery so weak that only 39,000 jobs were created in November. The unemployment rate last month rose to 9.8 percent, the highest level since April, the Labor Department said on Dec. 3, three days after the Bernanke interview was taped. Republican lawmakers have said the Fed’s policy of “quantitative easing” may do little to help unemployment and may fuel inflation.

Chinese renewable energy firms encouraged to invest in U.S. market (Xinhua) — A senior official of China’s National Energy Administration (NEA) encouraged Chinese firms to invest in the renewable energy market of the United States to boost their competitiveness in the international market. The statement was made by Wang Jun, head of the department of new energy and renewable energy at the NEA, during the wind power section at the China-US Renewable Energy Investment Forum, also attended by officials from the U.S. Department of Energy and the Department of Commerce. He noted that the U.S. wind power market has great potential but is short of funding in the wake of the international financial crisis. However, there remains opportunities for many Chinese wind power enterprises with strong expertise and funding.

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