The number crunchers have had their first stab at Monday's tax deal, and the economic impact is impressive. Goldman Sachs now thinks the economy will grow as much as one percentage point faster next year than its current forecast of 2.7 percent, which was bumped up from 2 percent only a week ago. JPMorgan has raised its 2011 forecast (fourth quarter compared to a year earlier) to 3.5 percent, from 3 percent. Moody's Economy.com sees growth next year at 4 percent. All of these forecasts imply some decline in the unemployment rate.
The initial reaction, in particular among liberal commentators, was that this was a political loss for Barack Obama, since he gave up more than the Republicans. But a colleague notes that this constitutes a loss only by narrow, Beltway-based accounting.
What will ultimately matter in 2012 is how the economy performs, not whose policies are responsible for that performance. If the economy is booming a year from now, Obama may be seen to have lost the battle but won the war. In spite of their grumbling, the rest of the Democratic caucus may also benefit. As a correspondent notes, "This is a pro-incumbent kind of package. And Democrats have a lot more incumbents running in 2012 than Republicans do."
Outside the Beltway, it doesn't matter who wins or loses but whether it's good for the economy. In the short run the answer is, unambiguously, yes. In the long run, there's not much comfort to be taken from the fact that Democrats and Republicans have once again proven they can come together to run up the deficit.