The tax cut deal President Obama struck with Republicans is likely to give a real jolt to the economy, economists tell the Wall Street Journal, which calls the deal “a second, stealth stimulus package.” While the tax cuts themselves may not boost growth much, the extension of unemployment benefits and payroll tax holiday could have a big impact. (Click here for details on the deal.) Economists at JP Morgan, Goldman Sachs, and Deutsche Bank said the plan would boost GDP growth by 0.5% to 1%.
This marks a major policy shift for the White House, observes the New York Times. Until now, Obama has largely focused on long-term goals like health care reform. Now, by trading tax cuts for the rich for a second stimulus, he’s re-focused on short-term economic growth. “This gave us a chance to do what most people thought wasn’t going to be possible in this environment,” said Lawrence Summers, “which is to provide a real forward lift to the economy.”