The White House has cut a controversial deal with congressional Republicans to extend the Bush-era tax cuts for two years, with the Obama administration acceding to tax cuts for the wealthy and reinstating the estate tax at a lenient rate in exchange for Republicans acquiescing to extending unemployment benefits through 2011, trimming payroll and business taxes, and maintaining tax credits for students and lower-income families.

This morning, as commentators delve into the dimensions of the liberal-infuriating grand bargain, which will cost over $900 billion over two years, a current of thought is emerging: might this ambitious economic package amount to a second stimulus, in a climate that appeared entirely inhospitable to the administration advancing further stimulative measures?

  • The Tax Deal Is A Back-Door Stimulus Plan, argues David Leonhardt at The New York Times. He admits the ideal package would have been larger than this one--with, say, the payroll tax cut applying to companies instead of workers--but politics thwarted that possibility. And economists are still estimating that the legislation will reduce the unemployment rate by one-half a percentage point to a full point over the next year and upgrading their estimates for economic growth. The deal, according to Leonhardt, represents a marked policy shift for the White House from long-term goals like health care reform and financial regulation to short-term job creation, as the economy fails to rebound the way the administration had hoped.
  • I Might Call It A Stealth Stimulus, asserts The Wall Street Journal's Sudeep Reddy. And amazingly, he adds, the agreement was hammered out without antagonizing legislators allergic to spending more to grow the economy. The extent to which the tax cuts spur growth depends on the amount of money consumers spend rather than save or divert to paying down debt, Reddy notes, but the extension of unemployment benefits is generally agreed to be a highly effective form of stimulus, since people out of work usually spend almost all the money they receive.
  • But It Isn't Large Enough, counters Barry Ritholtz at The Big Picture: "Just as the original stimulus was too small to counteract the effects of the credit crisis, so to, this will be too small to fully do the job for the broader economy. I would have preferred a full payroll tax holiday (6.2%) for the year. And I would also have liked to see a temporary exemption and reduced tax rate for repatriation of overseas monies held by US Companies."
  • If Stimulus Was The Goal, A Different Mix of Programs Would Have Been More Effective, suggests Catherine Rampell at Economix. She points to a recent Congressional Budget Office report on the Recovery Act, which indicated that the federal government's purchase of goods and services and channeling of money to state and local governments for infrastructure projects were more stimulative than tax cuts.
  • But Given Political Realities, This Is A Win, claims The Washington Monthly's Steve Benen: "For some opponents of the plan, I suspect the principles at stake are paramount ... But if the question comes down to an either/or scenario--will the economy be better off if the agreement is approved?--there appear to be quite a few credible economists arguing that passage is preferable to defeat."
  • Though It Will Fuel Debate About Deficit Reduction, predicts CNN's Ed Henry. Independent budget analysts believe the tax deal could add as much as $900 billion to the national debt, which would put the expense higher than Obama's $814 billion stimulus package in 2009. The president has essentially postponed "hard choices" about government spending for another day, Henry says.