Our analysis of the framework tax agreement that President Barack Obama announced Monday, including additional tax cuts and an extension of unemployment insurance, finds that 2.2 million jobs will be the end result. In this time of economic distress, millions of new jobs are, of course, very welcome. It is, however, unfortunate that these jobs have to come from an agreement that is a balance between large, unneeded, bonus tax breaks for the wealthiest Americans and the needed continuation of unemployment benefits, middle-class tax relief, and additional help for the economy for the rest of us.
While the terms of the deal are understandable given the effective veto power of conservatives, it is unfortunate that policies aimed at the vast majority of Americans and at boosting the economy were held hostage to wasteful tax cuts for the wealthiest 2 percent. But the Obama administration clearly had its eye on job creation in its willingness to accept $133 billion in misallocated bonus tax breaks for the rich in exchange for policies to sustain the economic recovery and help the middle class.
We estimate that the deal as described would save or create 2.2 million jobs, excluding jobs associated with the extension of the broader-based portions of the Bush tax cuts on which all parties were agreed. To give an example of how the $133 billion used for the bonus tax cuts, including estate tax cuts, could have been better used: If it had been instead put to additional payroll tax cuts, 2.7 million jobs would be saved or created. Or alternatively, of course, the deficit could have been $133 billion less.
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