Now that the super committee lies in ruins, Congress has another scramble on its hands—what to do about the current payroll tax holiday, which is up Dec. 31, and unemployment benefits, which expire for 2 million people soon after. Failing to extend either could put a serious dent in economic growth, with the average American worker facing a $1,000 tax hike if the payroll break expires, economists tell the LA Times. Payroll tax relief has traditionally been popular, but many Republicans are balking at the cost of the two programs, which stood at $168 billion this year.
President Obama plans to stump for the payroll tax reduction in New Hampshire today, Reuters reports. “If we don’t act, taxes will go up for every single American,” Obama said yesterday. “And I’m not about to let that happen.” He has also promised to veto any attempt to stop the automatic cuts the committee’s failure has triggered. The New York Times highlights a Moody's report that points out that, should the triggered cuts occur and the payroll tax holiday end, the deficit would shrink from $1.3 trillion to $510 billion by 2013, which it calls a "historically extreme" reduction. That's a dangerous prospect, according to an economist behind the report: "You’re taking a weak economy and removing a large part of potential demand, which could be enough to tip us into recession." (Read more super committee stories.)