It could have been a replay of the debt ceiling debacle all over again, but not even Congress is that crazy, right? Lawmakers reached agreement on a compromise $1 trillion spending bill to avert a weekend federal shutdown. Now the real deal making begins, as the battle over the extension of the payroll tax cut and unemployment benefits for the long-term unemployed continues.
Senate Majority Leader Harry Reid, D-Nev., told reporters that he was still optimistic that bipartisan talks on year-long extensions of the payroll tax cut and unemployment coverage would succeed. But just in case, they are also working on a “Plan B,” a two-month extension which would give the two sides enough time to figure out how they would pay for these two doses of stimulus.
I’m sure that no lawmaker would use that bad, bad word, but that’s what these two measures really are: two valuable forms of short-term stimulus. Economists estimate that the two extensions will add about one percent to growth (as measured by GDP) in 2012. Considering that growth is only expected to be about 2.5 percent in 2012, a one percent hit would be dramatic, which is why Congress must figure out a way to get the deal done.