secret that the Republicans hated the Making Work Pay credit. They wanted all the stimulus provisions to expire.
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Senior White House adviser Larry Summers told reporters on Wednesday that the GOP wanted to replace Making Work Pay with the payroll cut. "It came out of the process of compromise with the Republicans who were more attracted to the payroll tax holiday concept, and that was a proposal that, as had been coming out of here, we had been giving considerable thought to in the context of the President's budget," he said.
White House officials have said that the situation must be viewed in the context of the entire package and that Republicans strongly resisted extending the refundable tax credits, such as the child tax credit or earned income tax credit, that will more than offset the loss of MWP for many workers. Had those credits expired, lower income workers would have been worse off.
House Democrats, in their package, did not extend MWP, so, in that sense, the White House proposal is more generous. Making Work Pay is a more effective stimulus, economist Dean Baker said, because a higher proportion goes to the poorest workers, who are most likely to spend it immediately. "Dollar for dollar, undoubtedly, Making Work Pay is going to be more stimulative. The higher-end people will get five times as much than someone earning $20,000," said Baker, of the liberal-leaning Center for Economic Policy and Research.
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The MWP credit was a really good benefit and it should have gotten more attention.