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.
â€œIf the Europe mess werenâ€™t there, there would be a good case for letting taxes go back up,â€ said Joel Prakken, the chairman of Macroeconomic Advisers, a major forecasting firm. â€œBut a combination of a big tax increase plus the threat from Europe, when the economy is still in the doldrums â€” why take that risk?â€
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. â€œPolicy makers are shortsighted,â€ 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 SociÃ©tÃ© GÃ©nÃ©rale 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.