White House Strategy on Tax Plan Compromise Amid House Democrats' Opposition

As the President's announced tax plan compromise faces opposition from House Democrats, the White House is working to bring them back into the fold and make the accord law. Austan Goolsbee, Chairman of the Council of Economic Advisors, discussed the strategy and the potential benefits of the tax deal on Bloomberg News.

Key Takeaways:

• Austan Goolsbee emphasized that the broad framework of the tax compromise, including middle-class tax cuts and investment incentives for businesses, is beneficial to the economy.
• The President's strategy is to focus on getting the tax deal done by Christmas, as taxes for ordinary workers would increase significantly if it is not passed, potentially harming the economy.
• The White House is willing to compromise on tax rates for high-income earners, but the President is committed to reducing those rates in exchange for investments in the middle class.
• The payroll tax holiday, which reduces the employee contribution from 6.2% to 4.2%, is part of the compromise, but it only applies to employees, not employers.
• Goolsbee acknowledged the Federal Reserve Bank of San Francisco's study finding that 0.8% of unemployment is due to extended unemployment benefits, but argued that the automatic scaling back of benefits as state conditions improve mitigates the issue.
• He also stated that the tax code overhaul is a priority for the President and that the fiscal commission's recommendation to broaden the base and lower rates holds appeal.

Statistics:

• 0.8% of the current 9.8% unemployment rate is estimated to be attributed to the last extension of unemployment benefits (Source: Federal Reserve Bank of San Francisco).
• Taxes for ordinary workers would increase by several thousand dollars if the tax deal is not passed (Source: Austan Goolsbee).
• The payroll tax holiday reduces the employee contribution from 6.2% to 4.2% (Source: Austan Goolsbee).
• President Obama's fiscal commission recommended broadening the base and lowering rates to reform the tax code (Source: Austan Goolsbee).

Sources:

• Bloomberg News
• Federal Reserve Bank of San Francisco
• Austan Goolsbee, Chairman of the Council of Economic Advisors