Tax Cuts Policy Test U.S. President Obama Ruling Wisdom
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In the euro zone countries for the implementation of fiscal austerity boggling occasion, far shore, the U.S. government still do not change a lot of "spreading the money" approach. Following the Federal Reserve announced the second round of the quantitative easing policy (QE2), the 6th U.S. President Barack Obama announced tax cuts the Republicans to reach a consensus. New programs include the previous Bush administration tax cuts expiring two-year extension referendum, will receive unemployment benefits extended 13-month bills, as well as corporate tax cuts and so on. This will undoubtedly stimulate the U.S. economic recovery to become the new chips, but this is also quite worried about the outside world, the financial position of the red light has long been the U.S. Federal Government can afford a larger debt.
In the U.S. economy is still weak today, progress in tax cut is tantamount to provide a new economic stimulus: Upgrading to boost the purchasing power will eventually be turned into engines of economic growth. Economists generally believe that reducing social security taxes and the extension of unemployment benefits is to revive the U.S. economy the most efficient way, because these two measures will promote the consumption of low-income families, while helping to create more job opportunities; from another dimension , the move has virtually reduced the QE2 and berated by the implementation of the Federal Reserve faces the dual pressures of political and economic.
By this positive news, authorities have raised their expectations of U.S. economic growth next year. Moody's 2011 U.S. economic growth is expected to increase from 2.7% to 4%, JP Morgan Chase economists expect this growth from 3% to 3.5%. Deutsche Bank economists said that the implementation of tax cuts could increase the output of the United States next year, 0.7 percentage point, economic growth is expected to reach 4.1%.
But there is another indisputable fact is that tax cuts will lead to the U.S. government has already postponed the budget stretched further deterioration. According to the Congressional Budget Office (CBO) predicted that the Federal Government to extend tax cuts for two years the total expenditure of about 501 billion U.S. dollars, while market participants expect further tax reduction plan will carry the next two years the U.S. government to increase the total debt of nearly a million billion.
If the tax cuts Congress passed the final agreement, while the U.S. government did not introduce the corresponding deficit reduction plan, then the United States in 2011 will be to tighten fiscal policy is not the only major industrialized countries, the fiscal deficit to GDP ratio may continue to remain at 9% -10% level. BNP Paribas economists expect the U.S. deficit in fiscal year 2011, the proportion of GDP, from the previously expected 8.5% to 9.5% in fiscal year 2012 the proportion will rise to 9.8%.
U.S. Treasury data show that the U.S. government's budget deficit has reached a record 1.3 trillion dollars, accumulated debt of as much as 13.8 trillion or so. While Democrats and Republicans have repeatedly expressed concerns about high government debt, and urged the Government to take measures to solve the problem. But the two parties in the political game to force both sides to compromise, the result is that the U.S. government must face this new burden of trillions of dollars.
In this regard, the rating agencies have issued warnings. 7, Moody's said that if the U.S. government does not take measures to control the growth of debt, the sovereign debt rating outlook may be worse. Fitch also believes that the U.S. government needs to come up with a credible medium-term program to reduce the deficit, investors around the world to ensure the confidence of the United States, and prove the sincerity of the government to maintain its rating.
Tax policy is the same as the "double-edged sword," a test of Barack Obama's governing wisdom. Give and take between the two parties reached compromise the tax cuts could eventually benefit the U.S. economy need the test of time, but the U.S. government must now realize that if the deficit does not improve the plight of long-term, may cause market sovereign comprehensive reassessment of debt risk, to bring new global financial market uncertainty. Difficulties faced by countries in the euro area is now a warning. |
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By :
Jessie Stone
Submitted
2010-12-11 09:15:20 |
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