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Moody’s Analytics Chief Economist Mark Zandi on the impact on the economy if the payroll tax holiday is not extended.
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Payroll tax holiday is set to expire lawmakers in DC are still debating whether -- extended but this next economist says failure to do so could very well lead to a double dip recession.
Mark Zandi is the chief economist of Moody's analytics and good to -- mark so glad you're here.
That your -- -- voice that we look to listen to because you've been right so many times but what makes you think that if we don't extend.
The payroll tax cuts that we would be pushed back into a double the procession.
Well it'd be a big hit the economy it's about a 120 billion dollars.
To the American taxpayer in calendar year 2012.
Says about a half a point to GDP in twinkle in.
Most of that it would occur at the start of the year when the economy.
Is at its most vulnerable because of the fallout from what's going on in Europe -- because of continuing house price declines so.
It it we may not go back into recession.
If we don't extend the payroll tax holiday but.
I think you know could be good insurance and to take out to avoid that -- didn't -- go back into.
Recession the cost to taxpayers will be much much greater than 120 billion dollars.
-- there's no there's no guarantee about what's gonna happen of that 120 billion right and there's no people may people may bank the whole thing right.
-- good point but we have had some experience with these kinds of tax cuts we've got tax rebate checks back in the summer of oh wait that was the very first fiscal stimulus under President Bush we got making work pay which -- payroll tax break as part of Recovery Act and -- we can go back and take a look at what consumers actually councils actually did with that money usually it's about revenues is it isn't usually about two thirds saved and in bad economic times and and the rest is spent.
Well actually what we've learned is it's two thirds spent within six months that was -- the experience from the rebate checks and from making work pay.
And -- don't -- reason why we shouldn't expect the same kind of a result from from this.
43%.
Of the people unemployed in this country have been jobless now for 27 weeks or longer or how important is it.
To sort of review the unemployment insurance program market need to do we continue with that no word do you believe.
What some people think and that is that the longer you offer the benefits that people not everybody of course some truly -- -- but that's a -- will -- met.
And hold on instead of working two jobs are really getting back out there into the workforce.
-- Some people are gaining it that the evidence is accumulating that.
That about a half point on the unemployment rate.
Is due to -- the emergency you -- program but having said that.
-- The vast majority people on you -- emergency life really are having a difficult time finding a job just a statistic.
For very.
Unemployed worker.
There are basically for every.
One job opening there for unemployed workers -- units -- very.
Difficult time for many unemployed workers across country so net net I still think it would be good policy.
Now the president has proposed and there's some Republican support.
For some reforms to the UY system.
It work -- and Georgia works is a program in Georgia because people working to get there and open interest and -- I think there's a really good ideas.
It should be implemented as part of any extension -- you -- but at the end of the day you know I think that still also very important.
Mark let's bring it back to Social Security for second if if in fact it is extended the payroll tax holiday that -- 120 billion it's not gonna be going into the Social Security counts.
That these are accounts at last your I think was a first time work.
Less money came in and went out what's gonna happen to Social Security if we keep the -- -- like this.
Nothing it's an accounting.
That needs to citizen accounting measures so you just take money out of the general fund doesn't worry at all of last year less money came in and went out.
But that's nothing -- the payroll tax holiday yes it worries me when you we do need to make some changes in Social Security system make shirts on solid ground.
But the payroll tax holiday has nothing to nothing to do we won't -- solvency -- -- now.
Not at all what's the best way -- just incorrect if we do extend that the payroll tax cuts what is the best way from where you stand to pay for it.
Because that's the big battle right now that's going on inside the beltway.
Yeah and I do think it should be paid for not in 2012 because he had a productive but beginning in 2013 -- on now the Democrats have you know as you know proposed.
Large a surcharge temporary surcharge on people make over million dollars a year in the Republicans are proposing largely.
To have more and larger cuts in federal government appointed you know what I just split down the metal.
And -- do both things to the degree that's necessary to get that 120 billion dollars because we need it.
And we -- in the move forward so let's says split the difference in the forward.
-- -- be good to see a mark thank you very much for coming in appreciate it.
Thank you.
