Thursday, June 09, 2011

US President Obama Mulls Tax Cuts as Compromise for Raising Debt Limits

If anyone thinks that the US government will allow market forces to determine her economy’s direction then they must be hallucinating.

US President Obama seems to be dabbling on another stimulus program aimed at arriving at a deal with Republicans to raise the debt limits.

From Bloomberg, (bold emphasis added)

President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages as they debate ways to spur hiring amid signs that the recovery is slowing, according to people familiar with the matter.

The idea, which is in preliminary stages of discussion, is among several being talked about at the White House as the economy holds center stage for the administration and Congress, the people said on condition of anonymity to discuss internal deliberations. The unemployment rate in May rose to 9.1 percent, the highest level this year.

The talks reflect the political constraints the White House is operating under with the Republican majority in the U.S. House pushing to cut federal spending. A hiring stimulus based on a tax break for employers may appeal to Republican lawmakers, many of whom have called for measures to help businesses.

This means that one deal will likely lead to another-a slippery slope of one intervention to another. The power to exert influence over the marketplace has been so irresistible. Likewise this reveals of the venality of politics.

As the great Henry Hazlitt wrote

The political appeal of inflation comes from fostering the
illusion in the great majority of voters that they will somehow get the better of the swindle, and profit at the expense of a few unidentified victims.

Pieces of the jigsaw puzzle keep falling into place, more signs of the imminence of QE 3.0.

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