Why Obama Has To Throw A Hail Mary Tax Cut After The Election

Obama Oct2010People listen backstage as President Barack Obama addresses the United Nations General Assembly at the United Nations in New York, N.Y., Sept. 23, 2010. (Official White House Photo by Pete Souza)

Photo: White House flickr

Barack Obama can’t count on getting re-elected unless the economy improves substantially in the next two years.And there’s no evidence that The White House is willing to leave things to chance — that is to say, that the private sector would just get going again — so it will certainly pursue something stimulative.

David Dayen at FireDogLake makes the obvious, but important point, that post-November, the only form of stimulus that has any chance of passing is a tax cut.

So based on the above, it’s basically a sure thing that a tax cut is coming, and probably soon.

The one that comes to mind, which would be the most stimulative, would be a payroll tax cut, a la the one favoured by Roubini, and others. The White House may cave on tax cuts and the rich, but the ones to really watch for will be those where you can dry a straight line between the cut and some form of new spending or investment.

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