This story broke yesterday – we’re waiting for the details of what Senator Reid is going to propose. On the Republican side it’s still a mess. While Republicans keep voting against the extension of the payroll tax cut holiday, GOP House Speaker Boehner has already said the extension is necessary. A slew of economists, and even folks on Wall Street, agree that if we don’t extend the tax holiday it could cut growth by up to 1.5 percentage points next quarter, which is a huge amount, especially with how weak the economy is at the moment, and the news that Europe may already be in another recession (which risks dragging us down with it, whether or not the euro crisis is resolved (which could also drag us into another recession or worse)).
The extension of the payroll tax holiday isn’t going to save the day, as far as our economy is concerned. Not passing it, however, is expected to deal a major blow to the economy next quarter, but just as importantly, it’s effectively a tax hike on every working American, courtesy of the Republican party.