Obama wants $255 billion stimulus to offset his tax increases on the rich
No - this is not a joke. The president is absolutely serious.
Acknowledging that his tax increase on the wealthy will slow economic activity, the president wants $255 billion in new spending.
Reason has left the building.
But President Obama's first offer to avoid going over the "fiscal cliff" holds out the hope of at least some stimulus. This would include extending the 2 percentage point Social Security payroll tax cut, boosting a tax incentive to businesses, establishing a $50 billion bank for long-term infrastructure projects, and extending unemployment benefits.
The total bill: about $255 billion out of the federal government's pocket - an amount the GOP would likely say needs to be offset by spending cuts elsewhere.
The argument in favor of such stimulus? The tax measures, at least, could minimize the drag on the economy from Mr. Obama's proposed tax increases on the wealthy.
"The increases in the top two income tax brackets would put a drag on consumption, so I think, from the Obama point of view, the spending or tax cuts are designed to offset that drag to consumption," says Michael Brown, an economist at Wells Fargo Securities in Charlotte, N.C.
But to some budget experts, Obama's list seems more like an opening round of negotiations, where he has asked for a lot more than he will get.
"It looks to me like these are bargaining chips," says Pete Davis of Davis Capital Ideas, which advises Wall Street firms. "Even most Democrats had given up on the prospect of getting the payroll tax cut extended."
Mr. Davis considers the odds of most of the stimulus proposals passing Congress "very low."
What's needed most, say others, is just buckling down and negotiating an end to the fiscal cliff. "Cancelling the fiscal cliff is economic stimulus," says Stan Collender, a budget expert and partner at Qorvis Communications in Washington.
If tax increases are going to depress consumption, don't do it. Simple, elegant logic that appears to have escaped those members of the administration charged with coming up with a plan to avoid the fiscal cliff.
But the tax increases are not about the fiscal cliff, or revenue, or anything so mundane. Sticking it to the rich is a cosmic question of "fairness" and if the economy takes a hit, that's a small price to pay for social justice.
We have raving ideologues in charge and taking us over the cliff will be the least of our worries.