Dr Chandan's Lead Indicator: "The Tax Compromise and the Erosion of Public Accountability"
Commercial Observer reports: Just short of opining, in his latest column in the Commercial Observer Real Capital Analytics’ global chief economist Dr Sam Chandan provides his outlook for the recently-passed Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. As the year-end deadline to extend the Bush-era tax cuts neared, and Congress prepared for a changing-of-the-guard in January, the legislative and executive branches eased into a compromise that would allow an extension of the tax cuts for Americans earning at all income levels, while also extending unemployment benefits for another 13 months.
Dr Chandan points out that, given the US’ less-than-robust economic recovery, the bill is more like “extend and pretend” for the public sector. The passage of this bill also marks the first informal debate in preparation for the 2012 presidential election, and indeed, every presidential-hopeful and their moms weighed in on the discussion.
More importantly, he remarked, are the actual effects the bill will have on the nation’s economy. Dr Chandan plainly stated, “By putting money back into earners' pockets, and by doing so in a manner that is more impactful for income-constrained households, overall consumption activity will trend higher. The multiplier effect of the unemployment benefits extension should prove very high since this income will be spent on necessities and will not drive higher gross savings. The payroll tax holiday will have a stronger multiplier for lower-income households than their higher-income peers.” However, with there still being significant slack in the US economy – both on the supply and demand side – Dr Chandan posits that, “By design, the income and payroll tax adjustments do not lower directly the cost of hiring new employees. Wages are sticky, and these lower taxes will not mean a fully compensating adjustment in prevailing wages. As a result, the impact on overall employment will be indirect and on the margins.”
For all of Dr Chandan’s thoughts on the recently-derived Congressional Act on taxes and unemployment benefits, please see the full original article on the Commercial Observer’s site.
View the full article on Commercial Observer: Dr Chandan's Lead Indicator: "The Tax Compromise and the Erosion of Public Accountability"
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