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 ? Read more