Probably the biggest open question in US fiscal policy is whether or not Congress will extend – in part or in full – more than $3,000bn in tax cuts enacted in 2001 and 2003 by George W. Bush.
With the provisions expiring at the end of the year, pressure is mounting on lawmakers to take some action in order to prevent all Americans from experiencing tax cuts on January 1 - an outcome which Goldman Sachs economist Alec Phillips this week warned would pose a significant downside risk to the US economy.
And yet, we learned yesterday that the Democratic majority in the Senate decided to throw in the towel and push back any debate and vote on the issue until after the midterm elections, prolonging the uncertainty for several more months – at least. Why ?
With worries about the huge US budget deficit running rampant in Washington – just look at Friday’s midsession budget review by the White House, which forecast deficits in excess of $1,400bn this year and next - fiscal policy options are clearly limited for Congress and the administration.
And so the attention of policymakers and politicians is quickly turning to longer-term tax policy issues, like the looming expiration of some $3,000bn of tax cuts enacted by President George W. Bush in 2001 and 2003, as I explain in today’s paper.
Last week, the big story was that Kent Conrad, the Democratic chairman of the Senate budget committee, broke with the administration’s official line that the tax cuts should only be extended for Americans earning up to $250,000, and allowed to expire for the wealthy.
Am I alone in feeling increasingly uncomfortable with the the global clamour for new taxes on banks and bankers?
Do I feel sorry for put-upon investment bankers with new tax demands? No. Am I comfortable with the greed culture in Wall Street and the City of London? No. is Barack Obama justified in asking for taxpayers’ money back? Of course. That is why we can give one cheer to the bonus supertax ideas in the UK and France; the US bank levy and the International Monetary Fund process of seeking ways to ensure the financial sector pays for its sins.