First, the tax deal will add a minimum of $500 billion to next year's deficit, which is already projected to be $1.6 trillion. Now, if my math is correct that sums to over $2 trillion, which is approximately 14% of GDP. By the way, this percentage is higher than the levels experienced by Greece and Ireland. And, we all know how well those countries are doing.
Second, don't get me wrong about the tax deal. I am all in favor of the 2% payroll deduction (Social Security and Medicare), extending the Bush tax rates for two years, expensing all business capital expenditures for one year, and extending the 99-week unemployment benefits for a year. (I do have reservations about extending unemployment benefits to almost two years, because I believe it is a disincentive to find work.)
Third, I am for tax cuts of every kind provided that we have corresponding cuts in government spending! However, that is definitely not the case with this proposal. All what we have done, if it becomes reality, is to enlarge the size of the government and, of course, the deficit.
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