President Obama makes tax cut compromise, extends Bush era tax cuts
President Obama's compromise deal with Republicans over extending tax cuts and unemployment benefits is going to happen. The millions of jobless Americans need those benefits to survive, and so does the economy. But the politics have to play out first.
KUSI's Steve Bosh explains the details of the Presidential tax cut compromise.
The President is caught between the increased power the Republicans gained in the election, and the mounting anger from members of his own party for extending tax cuts to the wealthy, and increasing the deficit.
House Majority Leader Nancy Pelosi says the President's compromise fails two important tests, it does not create jobs and adds to the deficit. There's even talk of a filibuster to block the compromise.
The President said he had no choice but to compromise, and likened his predicament to a hostage situation. “In this case the hostage was the American people,” President Obama said, “and I was not willing to see them get harmed.”
Clearly the President is worried about unemployment, and the fragile economy. His compromise helps both. President Obama went on to say, “My job is to make sure we have a north star out there, what is helping the American people live out their lives, what is giving them more opportunity, what is growing the economy.”
Here's how it helps everyday Americans.
It means the Bush tax cuts are extended for another two years, and the payroll tax workers contribute will be cut by 2-percent. On a 70-thousand dollar a year household that's 1,400-dollars in your pocket.
Former SDSU Finance Professor Tony Cherin says this will stimulate the economy because the high earners are the job creators.
For the unemployed, including the millions of Americans whose jobless benefits run out this month, the checks will keep coming for another 13 months.
Professor Cherin says the extension of these benefits is also a stimulus, “the unemployment benefits is probably one of the biggest issues or one of the biggest factors in this latest compromise.”
So this deal avoids a tax increase next year, puts more money in workers' pockets, and it extends unemployment benefits to those not working.
Just as the President had to cave in to Republicans, disgruntled Democrats will also have to throw in the towel and pass this compromise. As the President said, the American people are watching.