President Obama compromising with Republicans on tax cuts

President Barack Obama is compromising with Republicans, giving both the wealthy and middle class a tax cut.

In this economy, some say they could really use it.

"I'd save it right away because the way everything is right now, if you spend 5 dollars, it's really pinching your wallet because you don't have a lot of money," said a Valley resident.

But James Wenzel, Political Science Associate Professor and Chair said to boost the economy, Congress hopes people would spend what they save from the tax cuts.

"When it comes to spending, the vast majority of spending, in terms of money that you and I spend, if I get additional money in my pocket, I tend to spend most of it," said Wenzel.

Which is why, Wenzel said policy makers probably think extending the tax cuts, which are set to expire in January, could be a good idea.

But the question is would those people who make over 250 thousand dollars spend the money from their tax cuts to boost the economy?

"If I were of independent means, quite wealthy, I wouldn't necessarily spend the money I got," said Wenzel.

Instead, Wenzel said the wealthy tend to invest their savings rather than spend, and it doesn't have the same impact on the consumption cycle, but if they invest more in their businesses and hire more people for production-Wenzel said that could be a plus for the economy.

"The other side of the argument is that right now, if there's no consumption going on, then there's not much incentive for me as a business owner to ramp up production of goods and services that no one is going to want to purchase or be able to purchase because of the economy," said Wenzel.

Even with President Barack Obama backing the tax cut, it'll be a tug of war to determine what kind of tax cuts if any would be approved by the senate.

Lawmakers have until the end of the year to pass this bill.

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