Unless you are backpacking in the Yosemite wilderness, you know that the House of Representatives approved a measure to avoid income tax increases on all but those who make more than $450,000 per year. The measure, H.R. 8, also postpones the sequestration spending cuts that were to be triggered today, and extends federal unemployment insurance benefits for the long-term unemployed until December 13, 2013. The bill also once again postpones MediCare provider payment cuts ("doc fix") and extends tax credits/expenditures/
Oh, and before you buy into the rhetoric of either side, note that the expiration of the payroll tax holiday will take more money out of paychecks ($125 billion) than the extension of the Bush tax cuts for the 98% will put in them ($120 billion). While it's a smart policy move as accrued Social Security benefits weren't being correspondingly reduced thus creating a hole in the "lockbox," it's a bit funny how nobody talked about it.
From a California perspective, the action--ugly as it is--is economically significant. With 1.8 million unemployed and the nation's third highest unemployment rate, the extension of federal UI benefits keeps cash flowing to the state's slowly recovering economy. Meanwhile, the delay of sequestration comes as good news to California's businesses that rely on federal contracts--in 2008-09, California businesses received $41.7 billion (13.7%) of the nation's prime defense contracts.
Of course, the deal is expensive. The Congressional Budget Office projects that it will add $3.971 trillion to the national debt over the next 10 years. We'll be back to this debate again in the days leading up to March 1, 2013, the date of the next sequestration trigger, or perhaps sooner as the nation once again approaches the arcane "debt limit."
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