Obama Tax Cut Deal Will Cost U.S. For The Long Run

The Bush tax cut has been extended for two more years and it is now called the Obama Tax Deal.

Bush tax cut has been effective since 2002 when the U.S. economy was doing rather good. But since then, with housing market collapse and unemployment of millions of people, the economy has been spiraling downward.

It does not make any logical sense to me to claim that extending the Bush cut will create jobs for American People.

Bush tax cut has been in existence during the time when the U.S. economy lost millions of jobs and still cannot get out of it. How is it possible to create jobs for American people with the same policy, which could not create jobs in the past? What is in the new Obama Tax Deal that is different from Bush’s tax policy? This is not a new tax policy. It’s simply an extension of the existing reduced tax rate for two more years.

Present U.S. budget deficit is $13.7 trillion. This Obama Tax Deal will add another $835 billion to the deficit in next ten years.

In two years time, when the tax deal expires, what is the possibility that the politicians will increase the tax rate to reduce the deficit. What will happen when its time to swallow the bitter pill, bite your tongue and increase Tax? Another tax revolt from citizens?

Here are the scenarios.

If Obama wins the second term, he should increase the tax rate when its time to review again in two years. But if the U.S. economy does not show any significant progress in two years, he will be pressured and probably will comply to grant another extension of the Bush tax cut, bringing in another trillion dollar deficit in U.S. economy.

If Republicans wins the Presidency in 2012, they will not increase the tax rate, to show their gratitude to American People for bringing them to power. So, more deficit will be added to U.S. economy.

In any rate, the U.S. economy is moving forward to oblivion as it looks like.