Extended payroll tax cut serves as 'stealth stimulus'

U.S. President Barack Obama speaks about a payroll tax cut and unemployment insurance February 14, 2012 in Washington, D.C. Lawmakers have agreed to a temporary extension of the cuts.

Jeremy Hobson: Congressional negotiators have agreed to a deal that would extend the payroll tax cut through the end of the year. It would also extend unemployment benefits and maintain the pay of doctors who accept Medicare. All of that means more money will go into more people's pockets and perhaps, they will go out and spend it.

You might call it economic stimulus, as Marketplace's Heidi Moore reports.


Heidi Moore: The deal is being touted as a win for unemployed Americans, who can keep their benefits; and workers, whose payroll taxes won't go up. But it's also stimulus -- a sort of a stealth stimulus.

Maya MacGuineas: Stimulus I actually think makes plenty of sense. The economic recovery is not strong. Giving the economy a little bit more juice makes sense.

That's Maya MacGuineas She's the president of the Committee for a Responsible Federal Budget. It's not as big as that mega-stimulus package from a few years back. But Congress is doing its best LL Cool J impression: it's hoping that the old stimulus will still "knock you out."

LL Cool J: Don't call it a comeback. I've been here for years.

But it's going to be expensive to maintain this status quo. The cost of these benefits has been a sticking point for a while. But Congress just stopped trying to figure out how to pay for it.

MacGuineas: They just used the national credit card.

MacGuineas says that eventually we'll max out.

MacGuineas: Keep in mind, what the country really has to be doing is finding savings of $4…$5…$6 trilllion.

Even with this boost, it's hard to picture an economy that's stimulated enough to generate that kind of cash.

In New York, I'm Heidi Moore for Marketplace.

 

 

 

This transcript was updated to reflect the correct spelling of Maya MacGuineas's name.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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