TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, December 26, 2010

CBPP: 'Democratic' Parts of Tax Cut Bill Boost Economy, 'Republican' Parts Add to Deficit

Center on Budget and Policy Priorities, Zandi Analyses Show "Democratic" Measures in Tax Cut-UI Deal Boost Economy, "Republican" Measures Add to Deficit Risks:

Chart 1 As a result of the tax cut-unemployment insurance legislation that President Obama signed into law last week, economic forecasters have substantially upgraded their outlook for 2011. ... An analysis of the compromise by Mark Zandi, the chief economist for Moody’s Analytics, indicates that this greater optimism stems largely from the longer extension of federal emergency unemployment insurance (UI) programs than forecasters had expected, the extension of various improvements enacted in 2009 in several tax credits for low- and modest-income families, and a reduction in the payroll tax. By contrast, the extensions of the upper-income Bush-era tax cuts and a substantially weakened estate tax will provide little or no boost to the economy in the short run; moreover, those extensions increase the risk that such measures will ultimately be made permanent and thereby deal a setback to efforts to restore long-run fiscal balance.

Chart 2

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How you get a tax exemption to do blatantly political work like this is quite beyond me.

Posted by: mike livingston | Dec 26, 2010 10:10:49 AM

Concur with Mr. Livingston.

Who the heck is Zandi, billed as the "chief economist for Moody's Analytics"? Did he publish any work back in 2007 supporting Moody's ratings of CDOs?

Posted by: Jake | Dec 26, 2010 5:33:44 PM