The proposed fiscal deal between Republicans and Democrats will provide a big boost to growth in 2011. The result is an extra fiscal stimulus of $1,000bn during the next two years. The extension of the Bush-era tax cuts will help to boost consumption:
- Extension of unemployment insurance throughout 2011 (highly effective to stimulate spending as the jobless tend to spend almost everything)
- Tax cuts for all income groups
The Fed is forecasting a more optimistic growth than many market forecasters due to this announcement.
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