In case you thought Barack Obama was only interested in spending billions to stimulate the economy, the incoming administration announced yesterday that billions in tax cuts are also planned.
The economic package under consideration by the president-elect and his Congressional allies would commit $675 billion to $775 billion over two years. If the tax cuts represent 40 percent of that, as Mr. Obamaâ€™s advisers said Sunday, that would mean about $270 billion to $310 billion.
About half of that would go to workers under what Mr. Obama during his campaign called the Making Work Pay credit, worth up to $500 for individuals and $1,000 for families. The Obama campaign estimated that about 150 million Americans making less than $200,000 would qualify, including those who make too little to pay federal income taxes but would receive a check that would offset Social Security and Medicare payroll taxes.
Obamaâ€™s plan also includes over $100 billion in tax incentives for businesses, most geared towards job creation and investment in new equipment.
While tax cuts will certainly be welcome during these hard economic times, there will need to be debate as to whether the Making Work Pay credit is really the most efficient and wise method of cutting taxes. After all, if weâ€™re going to refund payroll taxes, we have to make sure weâ€™re not defunding Social Security and Medicare in the process.
That said, I imagine Obama will have enough political capital early on to pass most aspects of his stimulus plan.