President Obama and some very unlikely allies in Washington, DC have given the American people a Christmas present of sorts. As a result of a bipartisan agreement between the President and Republican leaders in Congress, middle class taxes will not only not go up — all working Americans will see a nice boost in their take-home pay — by as much as $2,000 per taxpayer on the first $106,800 in earned income. The long term unemployed will see their unemployment benefits continue for up to 13 months, and millions of taxpayers will continue to claim the child tax credit. The college-tuition aid program has also been extended, as have the earned-income tax credit for low-income Americans, and tax breaks for small businesses.
The agreement signed into law by the President on Friday also provides some very much needed additional stimulus for the American economy. Hundreds of billions of dollars will now be pumped into the economy over the next two years and that could very well make all the difference between an economy that continues to stagnate and one that begins to recover in earnest. In any event, it seems like the continuation of tax breaks for the wealthiest Americans is a small price to pay for this bipartisan compromise. What difference will two more years of tax breaks for the wealthy have after having them in place for the past ten years.
What counts now is whether the economy will grow rapidly enough to help reduce the structural federal deficit. There will be plenty of opportunity to fight and win on tax rates as part of the upcoming battle to tackle the federal debt and ultimately as part of the presidential and congressional elections in 2012. So for now, those of us who work for a living should all be thankful for the extra cash we will be seeing in every paycheck beginning in 2011. And thinking about how we want to spend it.