tax cuts

Republican leaders may be worried about the Federal Reserve's second round of quantitative easing, but the stock and credit markets are delighted: They've improved significantly since the plan was announced. But can the rally be solely attributed to QE2?

Gallup, Pew Center and Washington Post/ABC News surveys all showed that Americans, for the most part, support the tax package approved by the Senate on Wednesday.

About six in 10 Americans approve of a tax package passed by the Senate on Wednesday that extends George W. Bush-era tax breaks for the wealthy as well extending unemployment benefits and cutting payroll taxes, according to a Wall Street Journal/NBC News poll.

If the agreement between congressional Republicans and President Obama is ratified, Pimco, which manages the world's largest bond fund, says the stimulative measure will contribute much to economic growth -- and to the deficit.

Nearly half of Americans in a recent poll believe China has surpassed America as having the strongest economy in the world, and more than half blame outsourcing and the loss of manufacturing jobs for the shift.

President Obama insists that his agreement with Republicans will help working people avoid a pay cut. But as tax experts look at the full package more closely, it has become clear that low-end wage earners will indeed take a painful hit.

The bonds have the U.S. government's full backing. But investors this week are waking up to an entirely different risk: the alarming drop in bond values and rising yields. And the reason for that may less a tax-cut-fueled deficit than brightening economic prospects.

The tax cut compromise between Obama and the GOP is now being touted as a back-door stimulus plan, one that some economists predict will create or save 3.1 million jobs. Unfortunately, the model on which those forecasts are based makes some flawed assumptions.

Nouriel Roubini, the NYU economics professor who has earned the nickname "Dr. Doom" for his predictions, says he's concerned the tax cut compromise struck by President Obama and GOP leaders could expose the U.S. to bond vigilantes who will drive up bond yields, resulting in higher borrowing costs for the federal government.

If the extension of the Bush tax cuts triggers a market rally, as many expect, investors will likely rush in. But caution is advised: High prices can also mean high risk. Here are some tips from Alan Lancz, director of research at LanczGlobal.com, on how investors can avoid getting burned.