Economists Predict Payroll Tax Deduction Will Have Significant Stimulus Effect. UPDATE: Reid Not Thrilled, Pelosi Didn't Know Obama Was Going To Go Public?

Deutsche Bank is pretty bullish on the payroll tax reduction aspect of the GOP-Obama tax deal.

According to our calculations, the Social Security tax reduction could add 0.7% to output next year, thereby taking Q4 over Q4 real GDP up to 4.1% versus our current 3.3% projection. This conclusion is based on the assumption that there are not offsetting expenditure reductions elsewhere in the Federal budget.

Goldman Sachs has a similar estimate.

If any part of this deal is going to stimulate the economy, this is it. The rest of the deal is mostly continuation of what we've been doing. Keeping the rates as they are was always defensive, a way to prevent Obama and the Democrats from doing more harm.

Obama is taking credit for the payroll tax cut idea and calming it is part of the concessions he got from the GOP as part of the overall agreement to keep tax rates steady but that’s simply BS.

Remember during the debate over the so called “stimulus” bill when Obama said the GOP didn’t have any ideas and simply was saying no to everything? That was always a lie, the GOP did have an alternative plan and guess what was item number one in it (pdf)?

Eliminate the 3.1% payroll tax for all American EMPLOYEES for 2 years, and use general revenue to pay for Social Security and Medicare obligations.

Imagine what the last two years would have been like had the stimulus actually been used in ways that stimulated the economy and not as a means to pay off Democratic interest groups.

As for the tax cut deal…Paul Ryan has come out for it but Harry Reid doesn’t seem to be in a rush to pass it. (Update: Reid says the deal needs "more work")

After today’s (un)presidential temper tantrum, I can’t imagine that Democrats are more interested in swallowing this pill than they were yesterday. If they fail to pass it in the lame duck, I’m guessing H.R.1 in the 112th Congress is going to be a bill to make the tax cuts permanent.

This is getting very, very interesting.

Wow: Pelosi isn't feeling the love in her caucus for the deal and then it got weird.

"We have some unease," Pelosi says of Obama plan & admits to being in the dark: "we didn't realize...agreement was going to be announced."

They didn't let Pelosi know they were announcing it? Can you say, "Amateur Hour"?

Best Democratic crack up in decades!

posted by DrewM. at 04:15 PM

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