Payroll tax cut extension deal could come soon
After much disagreement, it looks as though House Republicans and Democrats might soon agree to extend the payroll tax cuts, which put a little extra money into our wallets each month.
Jeremy Hobson: Now to the payroll tax cut that’s been putting some extra money in our pockets for a little more than a year. That tax cut expires at the end of this month unless Congress decides to extend it. Well, House Republicans, who had initially said they were looking for spending cuts to offset the tax cut’s $100 billion cost, now say they’ll pass it without offsets. But, they say, they’re not willing to extend unemployment benefits past this month unless their price tag can be offset.
For more on all this, we’re joined by Mark Zandi. He’s chief economist with Moody’s Analytics. Good morning.
Mark Zandi: Good morning.
Hobson: So it looks like House Republicans have said they’re willing to go along with this extension of the payroll tax cut but only if it’s removed from other aspects of the bill, like unemployment benefit extensions. What’s going on?
Zandi: Well I think Republicans are more suspicious of the unemployment insurance program and the benefit that it provides. There are some disincentive effects. They think that some people are taking advantage of the system. So, I think they’re trying to separate the two programs and they’re much more favorable about the payroll tax than they are about the emergency UI program.
Hobson: So do you think that this will get passed and we’ll have it extended through the year?
Zandi: Yeah, it looks like it and certainly the payroll tax holiday. I think there’s a lot of bipartisan support for that — so yes, I think that’ll happen.
Hobson: What does this mean for the economy, in terms of growth for the next ten months and jobs?
Zandi: Well I think it’s good news. I think we need the payroll tax cut holiday through the end of the year. It’s a lot of money. It’s almost $100 billion. So that adds up to a few hundred thousand jobs and 0.3 percent of unemployment. And in the context of the economic recovery which is still fragile, I think this is important, so I think it’s good news.
Hobson: Mark Zandi, Chief Economist with Moody’s Analytics. Thanks a lot.
Zandi: Thank you.