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The Payroll Tax Cut and U.S. GDP Growth

by Jon Hill
December 27, 2011

Breaking Down 2011 U.S. GDP Growth

U.S. annualized real GDP growth of 1.2% through Q3 2011 was driven by personal consumption, accounting for 91% of it.  Yet only 44% of personal consumption growth was driven by higher incomes.  The other 56% was accounted for by unsustainable items: a decline in savings (36%) and the payroll tax cut (20%).  The latter will expire in two months time unless Congress acts to extend it again.

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Post a Comment 2 Comments

  • Posted by John Slocum

    The combined impact of the payroll tax cut and decline in savings tells quite a story — we have not yet healed the economic engine in the USA.

  • Posted by David @ Engage America

    In your analysis, does the payroll tax cut include the extension of unemployment Insurance?

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