This is Google's cache of It is a snapshot of the page as it appeared on Jul 29, 2010 19:14:31 GMT. The current page could have changed in the meantime. Learn more

Text-only version
These terms only appear in links pointing to this page: http www cnbc com id 38467149  
Letting Bush Tax Cuts Die Would Kill Recovery: Analysts - CNBC
Skip navigation

Current DateTime: 11:50:44 29 Jul 2010
LinksList Documentid: 24355697

Current DateTime: 12:12:44 29 Jul 2010
LinksList Documentid: 23452764
Expiration DateTime: 7/29/2010 12:15:24 PM


Current DateTime: 12:12:45 29 Jul 2010
LinksList Documentid: 31330905
Expiration DateTime: 7/29/2010 12:15:45 PM

Current DateTime: 07:55:33 29 Jul 2010
LinksList Documentid: 35819653
    • Notable IPO's

        How much do you know about some of the more notable IPO's in investing history? Take our quiz and find out.

powered by digg

Letting Bush Tax Cuts Die Would Kill Recovery: Analysts

Published: Thursday, 29 Jul 2010 | 10:54 AM ET
Text Size
By: Jeff Cox Staff Writer

  • Digg
  • Buzz
  • Facebook
  • Twitter
  • More Share

The nascent US economic recovery would be halted in 2011 if Congress fails to extend the Bush tax cuts for the wealthiest Americans, analysts at Deutsche Bank said.

US Capitol Building with cash

The cuts were enacted in 2001 and 2003 under President George W. Bush and covered those earning more than $250,000, but they are set to expire at the end of this year.

Deutsche said the drag on gross domestic product should they lapse could be as much as 1.5 percent, with the more likely impact at 1.1 percent.

The impact would be worse, the analysts said, if Congress fails to fix the Alternative Minimum Tax, which was enacted in 1969 to make sure rich people pay taxes but was never indexed for inflation, and thus is now hitting middle-income workers.

"In a worst-case scenario, allowing the Bush tax cuts to expire and failing to fix the AMT could result in (1.5 percent) of fiscal drag in 2011 on top of the 1 percent fiscal drag we expect to occur as the Obama fiscal stimulus package unwinds," Deutsche said in a note to clients. "If the recovery remains soft/tentative through early next year, this additional drag could be enough to push the economy to a stalling point."

The opinion runs counter to that of Treasury Secretary Timothy Geithner, who said earlier this week that allowing the cuts to expire would not cause the economy to re-enter recession. The administration has proposed letting most of the tax cuts stand, but eliminating the ones for the top-tier earners.

Deutsche compared the situation to Japan in the 1990s, when the government let tax cuts expire and cut stimulus, leading to another leg down in the recession and ensuring the nation's "lost decade" of no economic growth.

While the US is headed toward unmanageable debt levels, now is not the time to start tightening the money supply, the analysts said.

"As soon as the economic recovery does look reasonably well entrenched, indeed, preferably even sooner, plans will need to be made to begin to put the US fiscal position on a more sustainable course," Deutsche said.

"As we have noted, this is not going to be an easy process politically, and it may well take a significant negative event in financial markets to steer the US political system to do what needs to be done."

© 2010
  • Digg
  • Buzz
  • Facebook
  • Twitter
  • More Share

Current DateTime: 05:55:07 29 Jul 2010
LinksList Documentid: 29778428

Current DateTime: 08:14:41 29 Jul 2010
LinksList Documentid: 29779196

Current DateTime: 11:03:02 29 Jul 2010
LinksList Documentid: 29779197

Current DateTime: 10:41:37 29 Jul 2010
LinksList Documentid: 29779199

Current DateTime: 10:23:16 29 Jul 2010
LinksList Documentid: 29779198
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2010 CNBC, Inc.  All Rights Reserved.
A Division of NBC Universal
Thomson ReutersThomson Reuters