The tax compromise brokered by President Obama with Republican congressional leaders will boost economic activity, adding ½ to 1 percent to the GDP, Steven Schwarzman, chairman and CEO of private equity firm Blackstone Group told CNBC Thursday.
“You will have more people with more money. Without taxes going up, you are going to have a variety of different incentives,” added Schwarzman. “I think the economy will respond positively to that.”
Schwarzman was upbeat about the psychological effect of the compromise as well, saying it shows government and business may be able to work together.
Although Schwarzman said nobody likes adding additional debt to the government’s balance sheet, which the tax compromise will do, there’s an upside.
“The faster the economy grows, the more taxes people will ultimately be paying," he said. "Everybody’s earnings will be higher.”
Schwarzman said he thinks the economy now has in a “forward momentum” and questioned the need for the Federal Reserve’s quantitative easing.
“Before you had almost this trillion dollars worth of stimulus from the fiscal side,” he added. “Now that we’ve got the fiscal side, it makes the quantitative easing just a little bit more marginal than it was.”