For some time, the Obama administration has made it pretty clear that it’s got no interest in extending the Bush tax cuts, at least not for the wealthy.
The line from Tim Geithner has been: the US needs to show a credible commitment towards deficit reduction.
But with the yield on the 10-year dipping below 2.5%, and the market now CLEARLY more worried about a double-dip than the US debt, Geithner’s justification for hiking taxes sounds silly.
Barron’s Steve Sears Tweeted that “trading desk chatter” he’s heard is that Obama will reverse course, and actually we can see it happening.
Obama needs a shock & awe kind of move to restore confidence in the economy and his administration, and a reversal on tax cuts would actually do it. All the claims about the administration being anti-business (and thus creating an uncertainty that was preventing hiring, etc.) would vanish.
Granted, we’re not sure it would have any REAL effect on the economy, just like letting the tax cuts expire wouldn’t cause all that much harm (except, insomuch as they hit small businesses), but in terms of a signaling mechanism, a reversal on tax cuts would be a good move.
Don’t miss: 11 new taxes currently coming in 2011 >
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