►Senate vote sets stage for approval of tax-cut bill
Shailagh Murray and Lori Montgomery/Washington Post/Dec 14
Republicans and Democrats joined forces in the Senate on Monday to deliver the most significant bipartisan vote since President Obama took office, advancing a plan to extend tax cuts for virtually every American and to boost the economic recovery…The package would add $858 billion to deficits over the next decade, according to congressional estimates. The bulk of the cost – about $545 billion – would come from a two-year extension of income tax reductions enacted in 2001, as well as provisions to adjust the alternative minimum tax for inflation through 2011, sparing more than 20 million mostly middle-income taxpayers from sharply higher tax payments in the spring.
►Summers Warns Against Permanent Tax Cuts
Damian Paletta/Wall Street Journal/Dec 13
Top Obama economic adviser Lawrence Summers praised the White House’s tax-cut compromise with Republicans, but issued a defiant warning to Congress to not make some cuts permanent when major elements expire in two years.
►Tax bill passes Senate test
John Fritze/USA Today/Dec 13
If the measure is approved this week, it heads to the House, where its path is murkier. Top Democrats predicted the extensions will pass, but would not say in what form. House Majority Leader Steny Hoyer, D-Md., said he is hopeful the measure will move by the end of the week. “We’re going to have a vote on the Senate bill, and with possible changes,” he said. “The legislative process is a process of give-and-take.”
Democrats are particularly anxious about changes to the estate tax that would permit a couple to pass $10 million on to heirs tax-free and would tax inheritance beyond that amount at 35%. The provision, which Hoyer said “a number of us would like to change,” would cost $68 billion over the next decade.
►Darrell Issa uncomfortable with tax deal
Jake Sherman/Politico/Dec 14
Count a future GOP committee chair as one of those icy on President Barack Obama’s tax compromise with Republicans.
California Rep. Darrell Issa, the future chair of the House Oversight and Government Reform committee, said the tax bill that passed a key procedural hurdle Monday is “an incomplete effort that fails to create a permanent tax structure giving businesses the kind of long-term predictability needed to support investment, economic growth and job creation.”
►The Tax Deal and the Apocalypse
Dean Baker/Huffington Post/Dec 13
As I have noted before, the major risk of this deal is that it would undermine Social Security. The deal temporarily lowers the Social Security tax by 2 percentage points. In principle, the tax rate will go back to its current rate after the end of next year.
►A Fiscal Non-Event, and a Stimulus Non-Event, Too
Douglas Holtz-Eakin/National Review/Dec 13
The discussion surrounding the tax bill — especially its contribution to deficits and debt and its “stimulus” effects — is hopelessly muddled. By and large, the bill is a continuation of current policy, which is to run massive deficits. And doing more of the same is not stimulus.
►Responding to Conservative Critics of the Tax Deal
Keith Hennessey/ KeithHennessey.com/Dec 13
I agree that the bill would be much better if the 2010 tax rates were made permanent. But if there’s no deal, we’ll have the current law rates for only another 18 days. Two years is better than 18 days.
►Will the Tax Deal Hurt Housing?
Stephen Gandel/The Curious Capitalist/Dec 13
So the recent rise in interest rates has John Mauldin on the Big Picture blog fretting that the Federal Reserve’s plan to buy Treasury bonds, called QE2, and presumably the tax deal as well, will make the struggling housing market that much worse…
So will the tax deal and QE2 sink the housing market? Probably not. Here’s the problem with Mauldin’s and others’ logic: Interest rates don’t really have that much effect on housing prices. Consider what has gone on in the past two years. Up until recently, the Fed has been driving down the rate on the 10-year Treasury bond. But has that boosted housing prices or sales? Nope. What’s more, housing price continued to rise in the mid-2000s even when interest rates were rising. The real thing that drives housing prices is jobs and access to credit. People buy houses when they get a new job and can get a loan. They don’t buy houses when they think there is a shot they will lose their current job. So if the tax deal is able to boost the job market, housing prices should rise. If not, prices will fall. The tax deal’s effect on interest rates doesn’t matter nearly as much, at least when it comes to housing.
►Video: Stockman Says Tax-Cut Deal Is Bad Policy
Simon Constable/Wall Street Journal/Dec 13
Former Reagan White House budget director David Stockman says the tax deal emerging in Washington is “Keynesian flimflam” that won’t help stimulate the economy.