Why Obama is pushing for stimulus in 'fiscal cliff' deal (+video)
President Obama's opening offer in 'fiscal cliff' talks includes $255 billion in stimulus spending – tax cuts, incentives, and more. It could be a bargaining ploy or a bid to offset rising taxes on the rich.
How about a little government economic stimulus?
That may sound incongruous considering the budget deficit and the push from Republicans to cut government spending.
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.
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