"...The deal eliminates Obama’s signature tax cut, Making Work Pay.
...Low-income families got more from Making Work Pay than they will from the reduction in their payroll taxes, so their tax bill will go up.
Taxes for about 5.7 percent of federal, state, and local government employees will rise, too.
They pay into public pension systems instead of Social Security.
They lose the Making Work Pay credit and gain nothing from the payroll tax cut.
...Rising federal deficits look like the answer for sparking near-term growth, but they also risk America’s position in the world.
Creditworthy governments normally spend no more than 10 percent of their revenues to service their debt. The United States gets wiggle room, because of the country’s underlying strength.
But if we start paying 14 percent of revenues, as we might in 2015, the markets could turn on the dollar – reducing its value, driving interest rates sharply higher, kicking the stock market down, and tumbling the world into another deep recession.
...Given the options, economist Sinai would choose spending cuts and slower growth, regardless of the harm. His fear is that the global market will suddenly force austerity on us, as it has with Ireland and Greece. ...he reads bad signs into the recent spikes in long-term interest rates."
Jane
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