The Tax Deal and Stimulus

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Tuesday, 07 December 2010 03:47

The NYT reported that the cost of the compromise on extending the Bush tax cuts will be approximately $800 billion over two years. It notes that this amount is similar to the cost of President Obama's stimulus package.

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.