The tax cut that failed
This is a great opening line by Michael Cooper: "What if a president cut Americans’ income taxes by $116 billion and nobody noticed?"
It happened, of course. But the nobody noticing was by design. The Making Work Pay tax credit was built for stealth. Working off of economic evidence suggesting that people are more likely to save a one-time windfall than a small increase in wages, the tax cut was used to lower the amount of tax withholding in people's weekly paychecks. The hope was that they would spend it, and it would thus do more to stimulate the economy.
This created two political problems for the tax cut. First, it was invisible. A recent CBS/NYT poll showed that fewer than 10 percent of Americans knew Obama had cut taxes. Second, because the administration had a distinct tax-cut design in mind, they added that to the stimulus rather than giving Republicans space to negotiate out a tax-cut portion that they would own. Obama has repeatedly named this as one of his major political mistakes.
Of course, if the tax cut's design had been much more effective at improving the economy, that would be of more political benefit than headlines or a brief moment of Republican buy-in. But the early research (pdf) on that front is not promising: It looks like it may have been less stimulative than a traditional tax cut.
It's a story that reflects both positively and negatively on the administration. The positive side is that they sacrificed politics and messaging for good policy. They were willing to forgo the headlines and the chance to force Republicans to own something if it meant improving the economy. The negative side, of course, is that it doesn't seem to have worked.
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