Economists agree that tax cuts for lower- and middle-class Americans should be continued but there are questions as to what should be done for the upper 3% of Americans.
If Congress were to let the tax cuts expire for everyone the deficit would drop to $732 billion but growth would shrink to .9 percent a year and unemployment would increase to 10.7 percent. The higher taxes decrease consumption and decrease job availability.
Republicans are fighting for tax cuts for everyone but President Obama has a different plan. He would like to continue the tax cuts for individuals with an income below $200,000 and couples below $250,000. However, after major losses in the elections, Obama has shown that he would be okay with one- or two-year extensions of the cuts to the upper 3%.
Extending the tax cuts permanently for lower-and middle-classes and allowing them to expire for upper-class Americans will leave grown at 2.6%, unemployment at 10%, and would decrease the deficit from $1.3 trillion to $904 billion.
Extending the tax cuts permanently for lower- and middle-classes and for one or two years for the highest earners will leave growth at 2.95%, unemployment at 9.9%, and decrease the deficit from $1.3 trillion to $943 billion.
By making the tax cuts permanent for everyone, growth will remain at 2.95%, unemployment at9.9%, but the deficit would grow to $4 trillion over the next ten years.
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