Economic Recovery Measures
The House is set to move forward on legislation that would enact a tax cut for small businesses. The Small Business Tax Cut Act (HR 9) allows small businesses (businesses with less than 500 employees) to temporarily deduct 20 percent of their domestic business income in 2012 up to 50 percent of employee wages. JCT has estimated that the bill would cost $46 billion, with almost all of that coming in the next few years.
Our recent paper on the fiscal cliff details the short-term or longer-term economic problems that the country will face if lawmakers either allow everything in the fiscal cliff to occur as scheduled or if they decide to extend it all. This blog will look farther into the potential short-term impacts, attempting to quantify what the cliff's 2013 effects would do to the economy.
CBO has released its newest cost estimate of the Troubled Asset Relief Program (TARP), projecting it to cost $32 billion over its lifetime, which is $2 billion lower than it estimated last December. The change in the cost estimate represents a reduction in the costs of AIG and GM support netted against an increase in the cost estimate of the mortgage programs.
As the Treasury Department continues its winding down of TARP programs, it will sell off $6 billion of AIG shares, likely bringing its ownership stake in the company down seven percentage points to 70 percent.
It's no secret that the conference committee tasked with finding solutions for the expiring 2-month fix for the payroll tax cut, unemployment insurance, and the doc fix is having a difficult time agreeing on how to offset the costs of any extensions. But just because coming to an agreement isn't easy doesn't mean it's time to abandon offsets altogether.
The conference committee that is tasked with extending various provisions that are set to expire at the end of this month will meet for the third time. They will be taking up the payroll tax cut, the doc fix, extended unemployment benefits, and possibly various expiring tax provisions that expired at the end of last year.
You can watch the video on C-SPAN.org here.
Remember when we said last November that Congress had a lot to do by the end of the year? Well, they took care of FY 2012 appropriations, but everything else is now left to be determined or temporarily extended by the end of February (at least they have an extra day). The payroll tax cut, unemployment insurance, and doc fix extensions that passed will expire by February 29 and there could even be pressure to extend the AMT patch and the "tax extenders" that were neglected last month.
In an op-ed for The Atlantic, CRFB Senior Policy Director Marc Goldwein made the case for offsetting the costs of the payroll tax cut, AMT patch, and unemployment benefit extension with the chained CPI. He argued that using the chained CPI, which is widely considered to be the most accurate measure of inflation available, makes both technical and budgetary sense.
News flash: Congress has a huge checklist to take care of. Many expiring tax provisions need to be dealt with, along with other temporary policies and the FY 2012 budget.
Doesn't this sound a lot like last year? Back in 2010, lawmakers had to deal with the 2001/2003 tax cuts, the doc fix, the AMT patch, unemployment insurance, tax "extenders", and FY 2011 appropriations -- in addition to a whole host of other non-budget-related issues -- in December.