President Obama agreed to work with Republican leaders earlier this week in dealing with Bush-era tax cuts set to expire at the end of this year. The compromise, which we still await details on, includes a temporary (2 year) extension of current income and capital gain tax rates for all taxpayers. In order to reach this agreement there will be an extension of unemployment benefits and temporary payroll tax reduction (2% cut in Social Security tax collected in 2011) among other sweeteners for Democrats. Some Democrats are fighting the deal and may derail the current version (see http://tinyurl.com/2awtu4w for more details), largely due to the estate tax reductions included in the deal when compared to 2009 estate tax law.
While these are good signs that our leaders are finding their way to compromise so that action can be taken to address key issues, these decisions remind many of “business as usual” as it relates to deficit spending. There was no mention of revenue raisers or spending cuts now or in the future to even partially offset the costs of this compromise (i.e. all new spending). While a weak economy needs to be addressed we must also realize that the clock is ticking as it relates to facing our financial responsibilities as a country.
