On Friday, President Barack Obama signed into law a sweeping plan to extend expiring Bush-era tax cuts and jobless benefits for millions of unemployed Americans.
The good news is that the bill extends long-term unemployment for 13 months. Without the extension, 7 million unemployed workers would lose their benefits by next November.
Workers will also benefit from the reduction of the payroll tax. Under the bill, a worker making $40,000 a year would save $800 a year. A worker making $70,000 a year would save $1,400.
The bill also includes deductions for mortgage insurance, child tax credits and several tax breaks designed to reduce the cost of paying for college.
The bad news is that the $858 billion tax deal does not include a significant enough stimulus plan. Many economists say government spending on infrastructure would not only repair the nation’s bridges and highways but would also increase jobs and stimulate the economy.
The tax deal will also extend Bush-era tax cuts for all income levels for two years, rather than expire at midnight on New Year’s Eve.
Obama and most congressional Democrats wanted to limit the tax cuts only to individuals making less than $200,000 and families under $250,000.
The president had campaigned on ending the Bush-era tax cuts for the rich.
But Obama said he had to make a deal to include tax breaks for all to win GOP support for the extension of jobless benefits and for taxes not to rise on the middle- and working-class.
Despite strong protest by liberal House Democrats including most members of the Congressional Black Caucus there was never any real doubt that the measure would pass.
The president and House Democratic leadership boxed themselves in a corner after failing to end Bush-era tax cuts when they had the numbers and power and popular support to do so.
The rank-and-file House Democrats have their leadership to blame for waiting too late to vote to end the Bush-era tax.
After a week of mainly symbolic protest, Democrats rallied around the president and supported the tax deal.
While the tax deal has many benefits it includes Bush-era tax cuts, which have already proven not to work.
The tax cuts will increase the federal deficit at a time when the nation is facing a weak economy and financing two wars.
To reduce the deficit there will be a growing call to cut spending and impose austerity measures. House Minority Leader John A. Boehner R-Ohio has already signaled the Republican message for austerity:
“It’s a good first step,” Boehner said of the tax deal, but “if we actually want to help our economy get back on track and to begin creating jobs we need to end the job-killing spending binge, we need to cut spending significantly…”
(Reprinted from the Philadelphia Tribune.)