An analysis posted at the Economic Policy Institute web-site predicts that economic policies stemming from the the new agreement on raising the debt ceiling will result in a loss of 1.8 million jobs in 2012.
- Applying conventional multipliers, the reduction of $30.5 billion in calendar year 2012 would reduce GDP by 0.3%, and result in roughly 323,000 fewer jobs.
- The payroll tax holiday reduced the Social Security payroll tax for all workers by two percentage points. Extending that tax cut for another year would provide roughly $118 billion in stimulus through increases in employees’ take-home pay, which would boost economic activity by an even greater $128 billion. Allowing this policy to expire would lower GDP by 0.8% in 2012, and would lead to roughly 972,000 fewer jobs.
- The continuation of unemployment insurance benefits to long-term unemployed workers (up to 99 weeks of benefits) is also set to expire at the end of the year. Allowing that provision to expire on schedule would mean $45 billion less in assistance to unemployed workers, and $70 billion less in economic activity (unemployment insurance has one of the largest bang-per-buck of any job-creation policy). That reduction in purchasing power would lower GDP by 0.4%, and mean roughly 528,000 fewer jobs.
