Zero Hedge – Since it would appear that QEternity has ostensibly failed in its main goal of pushing the stock market higher (and mortgage rates lower), the White House seems to be scrambling. Obama administration officials have concluded that the economy, while improved (apparently), is still fragile enough to warrant another bout of stimulus. The same old kitchen sink is being thrown at the problem as they are now resorting to the same fiscal stimulus that has also failed time and time again (as we noted here). As WaPo strawmans reports the White House is discussing the idea of a tax cut that it believes will lift American’s take-home pay and boost a still-struggling economy (citing people familiar with the administration’s thinking).
Once again we expect ‘economists’ to come up with counter-factual forecasts.
We can’t help but get the terrible feeling of deja vu here (paging Christine Romer). Electioneering? for sure; Will we hear “We have a plan”; of course; but in reality for this to make any sense (in the debt-deleveraging balance sheet recession that we find ourselves in), we must wipe from our minds for one moment the looming fiscal cliff (that our politicians seem stuck with irreconcilable differences), the debt-ceiling/deficit/AAA downgrade debate, and the utter failure of linear-Keynesian model forecasts for stimulus effects in the past.
Via Washington Post:
The White House is weighing the idea of a tax cut that it believes would lift Americans’ take-home pay and boost a still-struggling economy, according to people familiar with the administration’s thinking, as the presidential candidates continue battling over whose tax policies would do more for the country.
Obama administration officials have concluded that the economy, while improved, is still fragile enough that it may need another bout of stimulus. The tax cut could replace the payroll tax cut championed by President Obama in 2011 and 2012, which was designed as a buffer against economic shocks such as the financial crisis in Europe and high oil prices. It expires at year’s end.
The administration’s work on the proposal comes as each presidential candidate is under intense pressure to demonstrate he has the better tax plan.