Just a quick post about Congress’ extension on Friday of the 2% payroll tax cut and some long-term unemployment benefits for two more months.
We have a fragile economy still, and there are considerable dangers of a severe shock from the likely recession in Europe.
Now is not the time to boost taxes 2% on all workers making less than $106,000.
“If the Europe mess weren’t there, there would be a good case for letting taxes go back up,” said Joel Prakken, the chairman of Macroeconomic Advisers, a major forecasting firm. “But a combination of a big tax increase plus the threat from Europe, when the economy is still in the doldrums — why take that risk?”
Gregory Daco, an economist at IHS Global Insight, another widely followed research firm, said policy makers were mistaken to assume that the recent improvement in the economy would automatically continue. “Policy makers are shortsighted,” Mr. Daco added.
Goldman Sachs estimated that the expiration could knock two-thirds of a percentage point off growth in early 2012 if the tax cut was not extended for a full year. More pessimistic analysts at the French bank Société Générale warned clients that failing to renew the tax cut and continue federal support for the long-term unemployed might erase growth entirely in the first half of next year.