Debate Club

A Strong Recovery Remains Elusive

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If Congress fails to extend the payroll tax cut and renew emergency unemployment insurance benefits before leaving for the holidays, starting January 1 American families will have less to spend, businesses will have fewer customers, and the economy will weaken.

The economy hit bottom two years ago, but a strong recovery remains elusive. One in 11 people still cannot find a job and many formerly middle-class families have fallen into the swelling ranks of the poor. Many people with jobs are nervous about keeping them, and companies are reluctant to hire more workers until they see stronger sales.

[Senate Republicans Offer Tax-Cut Renewal Plan.]

Government actions helped stem an economic free-fall in late 2008 and early 2009, and further action would give the recovery a needed boost. Ideally, Congress should enact a range of policies that include not just extending the payroll tax cut but expanding it; renewing emergency unemployment insurance for another year; investing in infrastructure and school repair; and funneling more money to states so police officers can protect communities and teachers could teach students instead of facing layoffs. Sadly, we are not debating the ideal, but the realistic--which is the bare essential minimum.

Last year, the two parties agreed on unemployment benefits and a two percentage point cut in the employee side of the Social Security tax through 2011. Policymakers must extend them for another year, however, to help struggling families and boost the economy.

[Grover Norquist Predicts Anti-Tax Pledge Will Keep Republicans on Top.]

Failure to extend the payroll tax cut would hurt workers in nearly every job and income category. For example, the nation's 1.4 million truck drivers, whose salaries average $39,450, would pay $789 more in payroll taxes, on average, while the nation's 2.7 million nurses, whose salaries average $67,720, would lose $1,354, on average. Nearly 2 million jobless workers would lose benefits if Congress does not renew emergency unemployment insurance.

Economists are warning about the severe consequences of inaction on payroll taxes and extended unemployment benefits. Goldman Sachs estimates that expiration of the payroll tax cut would reduce growth by as much as two thirds of a percentage point in early 2012. Moody's Mark Zandi adds that if Congress does not extend the payroll tax holiday and unemployment benefits for 2012, "there will be approximately 1 million fewer jobs by year's end."

Chuck Marr

About Chuck Marr Director of Federal Tax Policy at the Center on Budget and Policy Priorities

economic growth

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54 Pts
A More Permanent Solution Is Needed

Yes – A More Permanent Solution Is Needed

Veronique de Rugy Senior Research Fellow at the Mercatus Center at George Mason University

-105 Pts
Keynesian Policies Have Failed

No – Keynesian Policies Have Failed

Chris Edwards Economist at the Cato Institute

-113 Pts
An Economic Loser in the Long Run

No – An Economic Loser in the Long Run

William McBride Economist at the Tax Foundation

-136 Pts
Many Time-limited Tax Breaks Never Die

Yes – Many Time-limited Tax Breaks Never Die

Howard Gleckman Resident Fellow at Urban-Brookings Tax Policy Center

-147 Pts
We Need to Focus on the 99 Percent

Yes – We Need to Focus on the 99 Percent

Heather Boushey Senior Economist at the Center for American Progress

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