Signing Off for Christmas (on a Note of Optimism)

More

Before I take a break, my new column for the Financial Times aims for a note of cautious economic optimism. To begin with, as you know, I see the tax deal as good news...

The revenue cost of the tax deal is more than $800bn over the next two years, prompting commentators to call it an even bigger stimulus than the fiscal plan adopted in 2009. This is nonsense. Almost all of the forgone revenue is due to the extension of tax rates and other measures already in place. Measured against a current-policy baseline, which is the only one that counts, the net new stimulus of the largest components is zero. The deal's main innovation - and it is a good one - is the one-year payroll-tax cut, which costs something over $100bn in 2011.

The extra stimulus, correctly measured, is modest. But the deal averted the possibility - and at one point, it seemed, the likelihood - that the US Congress would become deadlocked over tax policy, and let all the tax cuts passed by the Bush administration in 2001 and 2003 expire. Democrats and Republicans, ever keen to put the country first, were happy to consider this option, if it meant gaining tactical advantage.

This outrageous game of chicken, pursued to the limit, would have caused an abrupt, severe and unforeseen fiscal tightening. Larry Summers, the departing head of President Barack Obama's National Economic Council, was mocked for saying that failure to reach agreement could create a second recession. He was right.

...but there's more, as the article says.

I'll be on semi-vacation for a week or so (Arizona and West Virginia, since you ask). See you on the 29th, or thereabouts. Happy Christmas to one and all.

Jump to comments
Presented by

Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

Get Today's Top Stories in Your Inbox (preview)

What Do You See When You Look in the Mirror?

In a series of candid video interviews, women talk about self-image, self-judgment, and what it means to love their bodies


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In