by Calculated Risk on 11/27/2011 05:57:00 PM

The two key downside risks to the U.S. economy are contagion from the European financial crisis and more rapid fiscal tightening. On fiscal tightening, there have been several recent reports suggesting that some sort of deal will be reached an the extension of the payroll tax cut.

From the LA Times: Parties look to payroll tax deal after collapse of deficit talks

The Obama administration has asked Congress to extend payroll tax cuts set to expire at the end of the year, and also to renew unemployment benefits. The tax-cut extension could cost the Treasury an estimated $112 billion, but if it lapses American workers will see an immediate tax increase on Jan. 1 that would cost a typical family $1,000 per year.
...
Economists warn that a failure to extend the payroll tax cut and unemployment benefits could cut the economy’s weak growth almost in half next year.

It seems likely that some sort of deal will be reached to extend both the payroll tax cut and emergency unemployment benefits, but there will be some politics first.

Earlier:
• Summary for Week Ending Nov 25th
• Schedule for Week of Nov 27th