Photo: Flickr Chris Griffith
From Nomura on the Super-Committee. If you’re looking for impact, look to financial markets and look at what happens with the payroll tax cut extension:The impact of the failure of the JSCDR on the US economic outlook will, in our opinion, largely depend on how financial markets react in the coming weeks and months. Our baseline forecast for the US economy did not assume that the work of the JSCDR would have a substantial impact on actual taxes and spending in 2012 – the Committee’s failure does not alter that assumption.
We still expect Congress to extend the payroll tax cut – worth about $120 billion per year and scheduled to expire at the end of 2011 – that was put in place at the end of last year (see US Roundup: “Time for a reset”, 18 November 2011). Congress still has to pass an Omnibus spending bill by mid-December to provide spending authority for ongoing government operations. That bill could be a vehicle for extending the payroll tax cut. Admittedly, the inability of the JSCDR to reach an agreement increases the uncertainty around this assumption.