What Fiscal Cliff? Obama Planning Another "Tax Cut" Fiscal Stimulus

Tyler Durden's picture

Since it would appear that QEternity has ostensibly failed in its main goal of pushing the stock market higher (and mortgage rates lower), the White House seems to be scrambling. Obama administration officials have concluded that the economy, while improved (apparently), is still fragile enough to warrant another bout of stimulus. The same old kitchen sink is being thrown at the problem as they are now resorting to the same fiscal stimulus that has also failed time and time again (as we noted here). As WaPo strawmans reports the White House is discussing the idea of a tax cut that it believes will lift American's take-home pay and boost a still-struggling economy (citing people familiar with the administration's thinking).


Once again we expect 'economists' to come up with counter-factual forecasts.


We can't help but get the terrible feeling of deja vu here (paging Christine Romer). Electioneering? for sure; Will we hear "We have a plan"; of course; but in reality for this to make any sense (in the debt-deleveraging balance sheet recession that we find ourselves in), we must wipe from our minds for one moment the looming fiscal cliff (that our politicians seem stuck with irreconcilable differences), the debt-ceiling/deficit/AAA downgrade debate, and the utter failure of linear-Keynesian model forecasts for stimulus effects in the past.


Via Washington Post:

The White House is weighing the idea of a tax cut that it believes would lift Americans’ take-home pay and boost a still-struggling economy, according to people familiar with the administration’s thinking, as the presidential candidates continue battling over whose tax policies would do more for the country.


Obama administration officials have concluded that the economy, while improved, is still fragile enough that it may need another bout of stimulus. The tax cut could replace the payroll tax cut championed by President Obama in 2011 and 2012, which was designed as a buffer against economic shocks such as the financial crisis in Europe and high oil prices. It expires at year’s end.




The administration’s work on the proposal comes as each presidential candidate is under intense pressure to demonstrate he has the better tax plan.




Any new tax cut would require congressional approval after the election. Administration officials have said in the past that the payroll tax cut should be allowed to expire at the end of the year, and the White House has not said publicly whether it is considering an alternative.


A growing number of voices have been calling on the White House and Congress to extend the payroll tax cut, which has meant about $1,000 in extra take-home pay annually for the average family. These supporters include Harvard professor Lawrence H. Summers, formerly Obama’s top economic adviser, and Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.


“If we’re going to look at anything, we should be looking at a payroll tax cut or other measures that have a similar effect,” Van Hollen said in an interview.


The White House declined to confirm whether it is exploring a new policy, with an official saying late Friday only that “there’s no specific new proposal such as this one at this time.”


The payroll tax cut... is considered particularly effective by economists because it shows up in every paycheck. Economists say it may have boosted economic growth each year by about 1 percent, helping create hundreds of thousands of jobs.


...some lawmakers, particularly Democrats, don’t like the idea of using a tax that ordinarily goes to fund Social Security. Any lost revenue as a result of the payroll tax cut has been offset by additional taxpayer money. Still, powerful interest groups such as the AARP have criticized using the payroll tax cut for short-term stimulus.


The administration is looking to replicate the effect of the payroll tax cut without relying on Social Security revenue, sources said. The people familiar with the deliberations declined to be named because the discussions are ongoing.


One option is to have employers reduce how much in federal taxes is withheld from employees’ paychecks, up to a certain amount per year.


This was precisely the type of tax cut provided in the 2009 stimulus bill, which sought to jolt the economy out of recession through $831 billion in increased spending, aid to states and tax cuts.




The tax credit was limited to individuals with an adjusted gross income of $95,000 or less and couples with an adjusted gross income of $190,000 or less. Economists say that low- and moderate-income people have the greatest propensity to spend any additional income.




Obama is calling on lawmakers to immediately renew the Bush tax cuts for families earning less than $250,000 per year, while allowing the tax cuts for those making more to expire. Republicans refuse to decouple the tax cuts.


Read that again - and we dare you not to laugh! This is Keynesian-based Einsteinian madness at its very best...


One report that apparently has scared the administration into action is the following from the National Association Of Manufacturers - Fiscal Shock.


Fiscal Shock Conclusion:

The inaction and stalemate in Washington will continue to weigh heavily on consumer and business confidence as the year winds down. Even if the Administration and Congress resolve the uncertainty before the end of the year, economic growth already has sustained significant damage. The short-term fiscal contraction set for 2013 will trigger long-run durable losses to GDP, productivity and real income.


Even under the best-case scenario, it will take almost a decade for economic activity and employment to reach the levels they would have reached without a fiscal shock. While the spending cuts and tax increases reduce the federal deficit and debt, the substantial negative consequences of not addressing the end-of-year fiscal crisis before it happens will be devastating.



Fiscal Shock

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Peter Pan's picture

Any tax cut that is not accompanied by a reduction in the size of the government, is a fraud and nothing more.

LetThemEatRand's picture

"I believe that to a large extent our current budgetary problems stem from the widespread adoption of an idea by Republicans in the 1970s called “starve the beast.” It says that the best, perhaps only, way of reducing government spending is by reducing taxes. While a plausible strategy at the time it was formulated, STB became a substitute for serious budget control efforts, reduced the political cost of deficits, encouraged fiscally irresponsible tax cutting and ultimately made both spending and deficits larger."

-Bruce Bartlett, Domestic Policy Advisor to Ronal Reagan

Politicians have been following that strategy ever since.   I believe it is known as having one's cake and eating it too, except the cake is your aunt Helga's fruitcake from 1980.


redpill's picture

The "administration's thinking" is an oxymoron.  There is no more thinking, there is only the nostril-burning stench of political desperation as the chance of them losing power increases.

SafelyGraze's picture

didn't find a cme product directly linked to tax rates

just hurricanes (well .. "temperature" exchange)

Code   Contract            Type Price Qty  Time
H61X2 PhiladelphiaTemp FUT 4580 200 15:42CT 
H61X2 PhiladelphiaTemp FUT 4670 100 12:48CT 
H61X2 PhiladelphiaTemp FUT 4600 050 10:19CT

thanks a lot, haarp

GetZeeGold's picture



Hail Mary pass.....let's hope Doug Flutie is a Bam Bam supporter.


jeff montanye's picture

why does let them eat rand's submission not allow up/down arrows?  i get no little hand there but do elsewhere.

A Lunatic's picture

Same car, same ditch, same backseat driver...........

GetZeeGold's picture



She was just a secretary.....I"m going places.


Tommy Gunner's picture

Ya same stench i have been smelling since Reagan took office and put us on this path to disaster - more commonly known as Voodoo Economics

BeetleBailey's picture

Notice Poppy Bush coined that - but (back then) backed away immediately. (In todays Twitter-twatting world of everybody up everybody's ass for a reason, that would have been viral).....

But it is plain and simple. No matter who "started" it...both did bascially....so both "sides" blow...

GeezerGeek's picture

Why stop there (Reagan)? Everything was peachy under Carter, if you ignore the high inflation and overall malaise (Carter's own words), wasn't it? How about under Ford, with his Whip Inflation Now campaign? Or Nixon, who imposed wage and price controls. Or...well, you get the message. What the US needs is a replay of the Warren Harding administration, minus the scandals.

thewhitelion's picture

Actually I think it's your children's (or grandchildren's) cake.  Enjoy!

knukles's picture

1.)  That is absolutely correct, but then again, what would we expect from those folks?

2.)  The tax cut has fuck all to do with the economy.  It's to garner more votes before the election.

3.)  They done went and told us there's fuck all nothing wrong whazzamatterfazzzo its doing gangbusters economy so why would we need a tax cut.

Oh dear shades of more Hell on Earth from our Illustrious Leaders of the Great Socialist Paradise on the Potomac.

4.)  So whatthefuck, Obey is a Reaganomics guy, now?

(shaking, withdrawal like symptoms, afraid propaganda will end, reality taking over, screams of silence)

AustriAnnie's picture

Notice the clever wording about how they will take the tax cut from "somewhere else rather than from social security revenue" (AS IF social security revenues are actually allocated and held for such purpose rather than just another tax that goes into the same pot as every other).

vast-dom's picture

how about make a 10% tax across the board and reduce gov by a mere 25% and problem solved. but please no ending the war on terror/drugs/us citizens. 

hawk nation's picture

Murdering babies in the womb is legal but legalizing all drug consumption is immoral. GO FIGURE

LongBalls's picture

I could give two dumps...sorry, make that one dump on what, when, where, and how. Give me a tax break, give them a tax break, break it off in your arse. This thing is coming down not matter what. I will continue to exchange your currency for my money.

LongSoupLine's picture

the next stimulus will be disguised as " hurricane aid".  the redistribution of middle class money to obama's highest campaign contributors will be staggering.  

Tommy Gunner's picture

ya and if romney wins his donors get the cash...  

so many stupid fucks in America - don't you get it? 

GetZeeGold's picture



So.....how much coin have you got from Bam Bam lately?


Yeah....I didn't think so. If the current guy sucks it only makes sense to let the new guy give it a shot.

Stock Tips Investment's picture

Correct. That kind of crazy ideas, driven by Keynesians, are the ideas that have led to this crisis. Obviously that less tax is healthy for the economy. But this can not be done without a plan to reduce government spending to keep the balance in the accounts. The rest is magic ... and magic is trick.

disabledvet's picture

i cannot disagree with you on this. the point in my view of "normalization of rates" policy would be to upwardly slope the yield curve and promote lending activity of our still bankrupt "mega banks." while nakedly inflationary i do agree "it creates a tax hike all its own" through bracket creep, etc. the hope as i would see it is that Government's that have refused to "right size" their policies towards what their constituents can handle will at the very least be understood as "engaging in risky behavior" and be penalized accordingly. Those States that have kept themselves "lean and mean" (Texas comes to mind) will be rewarded. on the good side the market is obviously all in on "deflation" as they keep front running the Fed every time Ben opens his mouth about some new bailout scheme that has no chance of working. (Ala Japan of course.) And the USA does have the cheapest and most valuable fuel source in the world in the form of natural gas. this advantage should be leveraged to PAY DOWN the debt...not "leverage the debt so we can create more of it" as is currently done. I am open to suggestions for alternatives of course...

the not so mighty maximiza's picture

Its all a waste, cut tax, increase money printing, it doesn't matter. We are screwed.  It doesn't matter since destruction is assured.  At least it makes some people feel better.

Haole's picture

I wish we could just get on with the "we are screwed" part of the plot because all the utterly pervertedly senseless foreplay is getting reeeeeeeeaally fucking tedious.

the not so mighty maximiza's picture

I agree,  its a neverending shit show with third rate actors.

BeetleBailey's picture

...also starring Ida Lupino....Granville Van Dusen.....and Benjie the Fucked up Federal pooch in....

....the next episode....."Economy Cujo"

hawk nation's picture

They keep making it harder and harder for me to get out of bed and be a productive member of society

I keep thinking who cares its all going to collapse

RockyRacoon's picture

Just a friendly word of advice, give up being concerned about what others (like gov't and other things out of your/our/my immediate control) and focus on doing what is needed to defend and protect what is yours and those you care about.  In all likelihood the sun will rise each morning, regardless.  All that external stuff is noise.

Tommy Gunner's picture

the sun rose each morning in kosovo....

GetZeeGold's picture



....and then the shooting started.


Haole's picture

DO NOT let them toy with your spirit and will to live a productive and satisfying life for yourself (and loved ones?) despite what the future might hold. 

hawk nation's picture

I'm prepared and would just like the game to begin

RockyRacoon's picture

It has begun!  It's just not in full swing such that the MSM has started covering the events in our back yard.

I'd say the die will have been cast when a local newsroom has been taken over by "radicals" and a SWAT team has to be called in before viewers are told the truth on camera.

Offthebeach's picture

"Keynesian chickens, ...come home to roost! "

GetZeeGold's picture



Bring me a cup of fat and the head of Paul Krugman.

Zadok's picture

The last naked dash to the finish began in 2008 when the Bernanke pulled 'flow' to precipitate the crisis thereby allowing unhindered weath theft.

Make no mistake, 'IT' is fully underway!

Proverb 27:12

Tommy Gunner's picture

There is nothing you can do that can prepare you for what is coming my friend. 

Tommy Gunner's picture

But if you don't go to work how will you earn cash to buy more gold?

OldPhart's picture

I'm starting to chafe, too.

francis_sawyer's picture

Economic Dream Team II bitchez...

docj's picture

Sheesh, it's 9-days from the election and The Mormon is leading in the polls so all of a sudden Choomy thinks "tax cuts" are OK?

Nope, that's not desperate at all.

CrockettAlmanac.com's picture

Every presidential election since 2000 has been "too close to call" despite the fact that the candidates have been consistently lackluster. I really don't buy any of it.

fonzannoon's picture

go ahead you two dumb bitches. Fight for my vote. Make me promises. Lower my taxes. Come mow my lawn. Cook me dinner you two stooges.

knukles's picture

OK Fonz, let's look at this in a critically clinical manner.
Obey and the Mitten come to your house to mow your lawn.  You have but one lawn mower.  Who be the supervisor and who will actually mow? 

Answers:  multiple choice

a)  Obey will mow
b)  Mittens will supervise
c)  They'll come to a bipartisan agreement
d)  It'll start a fistfight
e)  One will break a bottle over the others head
f)   Krugman will say it's the best way to get people back to work
g)  Chris Matthews will say its a racist trick question
h)  The Fonz would make a fortune selling tickets
i)   None, some or all of the above, but who the fuck cares
j)   Ron Paul 2012

fonzannoon's picture

Well let's take it a step further. If they came to my door right now.....I would send Obey out to the empty stop and shop with my grocery list. I would tell Mittens to get moving cleaning the leaves out of my gutters and clearing my drain pipes for Sandy. I would be curious to see who comes up more empty handed. Obey on the food or Mittens scouring my neighborhood for some mexi's to get moving on the yardwork. My guess is they both sit there on my couch drinking beers watching the saints game while my neighbors tree is leaning on my roof and I am scrambling.