Congress’ Looming Deadline. Act 15,678.

By Erika Morphy

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Almost all of the ingredients for a continued economic recover are in place. Almost.

More positive momentum in the jobs numbers? Check. A Federal Reserve Board that seems determined, hell or high water, to keep interest rates aggressively low for the duration? Check. A resolution to Europe’s fiscal and debt problems? It seems to be happening—if you put aside the teeth-gritting and foot-dragging--so let’s check that off too.

A sane Congress willing to work toward mutually-beneficial goals, or at the very least, meet important deadlines? No such luck.

I am not even going to address larger issues such as tax reform, supposedly also on the legislative agenda. The deadline to which I refer is the payroll tax cut extension, passed by Congress at the end of last year.

The extension was granted for two-months—and the deadline is coming due at the end of February.

The political newspaper The Hill has been tracking the progress of the payroll tax conference committee and the reports have been, shall we say, disturbing. For example, last week it reported that Democrats and Republicans both said they want to keep extraneous measures out of a package to extend the payroll tax cut. "They just don’t agree on what constitutes extraneous."

A more recent report in the paper says the conference committee will do more of its work behind closed doors. Hopefully that will help.

This payroll tax cut extension is important, based on several economists’ analysis of growth in the US for the coming year. In short, they have factored in the additional spending power it will give consumers to come up with their modest projections of growth.

More to the point, if Congress flubs this, businesses will lose all faith that  Washington can do even the bare minimum to keep the economy functioning. Who wants to make investments in such an environment? Not foreign investors as it turns out. I suspect one of the reasons why Brazil ranked so much closer to the US in appeal to foreign real estate investors in this year Association of Foreign Investors in Real Estate survey is that our governing class is slowly devolving into something usually seen in an emerging market.

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