Money in the Morning


The Obama administration is mulling the idea that any new stimulus may have to be in the form of tax cuts in order to pass Congress.

TOP STORY — WSJ: “Tax Cuts Weighed to Spur Economy”

“On the list of possible actions: additional tax cuts for small businesses beyond those included in a $30 billion small-business lending bill before the Senate. It's not clear what those tax breaks would target or how much they might cost in lost revenue to the government....

“Also in the mix: a possible payroll tax cut for businesses and individuals, as well as other business tax breaks, according to people familiar with the discussions.”

ICYMI: President Obama said Tuesday night in his Oval Office address on Iraq that fixing the economy will be his “central mission” and “central responsibility.”

FLASHBACK: McCain-turned-Dem adviser Mark Zandi last week backed an extension of all Bush-era tax breaks because the fragile economic recovery might not be able to handle higher taxes.

More center-left pundits backed tax breaks Tuesday.

NYT’s David Leonhardt: “The best hope for a short-term economic plan that can win bipartisan support is a tax cut — and not the permanent extension [of the Bush cuts] ... the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money.”

Tax Policy Center’s Howard Gleckman suggests a scaled-down version of Obama’s Making Work Pay tax credit or expanding the Earned Income Tax Credit, either of which would benefit people more likely to spend extra cash than the wealthy.

Gleckman on the political reality of tax cuts: “Republicans could say they extended all of the Bush tax cuts (at least in magnitude, if not in specifics). And Democrats could take credit for retargeting those upper-bracket dollars. 

And/but... WH economist Jason Furman warns that a temporary tax-cut extension for the rich would be a “foot in the door” for permanency.

Meanwhile... The estate tax needs to come back, say Bob Rubin and Julian Robertson.

POISON PORK: Sen. Lisa Murkowski concedes her GOP primary race in Alaska to Joe Miller, becoming the latest appropriator to lose this year.

List of appropriators losing primaries in 2010: Sen. Arlen Specter (D-Pa.), Sen. Bob Bennett (R-Utah), Rep. Alan Mollohan (D-W.Va.), Rep. Todd Tiahrt (R-Kan., running for Senate), Sen. Kay Bailey Hutchison (R-Texas, ran for governor), Rep. Zamp Wamp (R-Tenn., ran for governor) and Rep. Carolyn Kilpatrick (D-Mich.).

Does Murkowski’s loss change this next year?: Alaska gets the most fed dollars annually, according to a new Census report.

Federal spending rose a record 16 percent last year. WaPo reports on Census report that found government spending to hit $3.2 trillion in 2009, “largely because of a boost in aid to the unemployed and the huge economic stimulus package enacted to rescue the sinking economy.”

JP Morgan's federal deficit chart (via Pethokoukis): Economic slump is biggest driver of current massive deficits, followed by mandatory spending, discretionary spending and tax cuts.

Tony Blair backs British PM David Cameron’s austerity program, slams former Prime Minister Gordon Brown for “state is back in fashion" thesis. Bloomberg:

Tuesday's indicators not so bad:

Home prices up in 3.1 percent in 2Q of 2010 — but that probably won’t last. The rise was due largely to now-expired homebuyer tax credit. Newsweek:

Consumer confidence index went up slightly from July to August, but not enough to spur hiring, writes The Atlantic’s David Indiviglio.

One bright spot: Ag exports. Government estimates expect them to reach $107.5 billion in fiscal 2010, the second-highest total ever.

LINK OF THE WEEK — The cause of the next financial bubble: Human cloning?(!)

Time magazine's Curious Capitalist: “Clones will earn more and more money, and those of us who reproduce the old fashion way will likely have poorer and poorer offspring. Recently, Barbara Kiviat wrote two posts for this blog on how income inequality was a major contributor to the financial crisis. So you do the math. If cloning leads to income inequality and income inequality leads to financial crises, then we've got a problem.”

BLOGGERS DEBATE: Is high unemployment a structural problem?

Brad DeLong says no (h/t Ezra Klein): “What we have witnessed is not a shift in demand into sectors lacking an adequate number of qualified and productive workers, but rather a collapse in the level of aggregate demand.”

The Economist’s Free Exchange says yes: “Demand is weak, but not enough to account for so many jobless.” The way to fix it is by helping small biz, the author says.

Stan Collender sees “bitter GOP criticism” of the Fed over coming stimulus measures.

FDIC: More than one in 10 U.S. banks still at risk. Sheila Bair: "It hit the large banks first and then the community banks, so they will be lagging the larger banks in terms of coming out of this."

But Bair doesn’t see a double-dip.