“It’s a lot of added stress,” Adams said.
The uncertainty facing Adams and millions of others receiving unemployment insurance underscores the difficult trade-offs involved in the debate over the fiscal cliff. With tax hikes scheduled to happen automatically at the end of the year and polls showing Obama with a clear advantage on the issue, the president seems to have much of the leverage. But a complicating factor is the fragile economy, which appears to be slowing down. The 7.9 percent unemployment rate is expected to remain unchanged when November’s jobs numbers are reported Friday and is unlikely to come down much through the start of next year.
Obama appears to be making progress in the legislative debate on the central issues of renewing George W. Bush-era tax cuts for the middle class and increasing tax rates on the wealthy. But victories over the GOP on those issues, some congressional aides and economists say, would probably come at the expense of other priorities, such as a payroll tax cut or infrastructure spending, that Obama says are important in a weak economy.
“Democrats have to think about what matters more — getting people employed sooner or immediately raising rates,” said Joseph Gagnon, an economist at the Peterson Institute for International Economics and an Obama supporter. “Are they willing to have hundreds of thousands more people linger in unemployment just out of a desire to punish the rich?”
Gagnon said it is important for there to be a long-term plan to reduce deficits — and that slowly raising taxes on the wealthy is an important part of the plan — but he said the weak economy means that it should not take effect for at least another year.
According to economists, if the payroll tax cut is not extended at the end of the month, it will mean at least $1,000 less in take-home pay for the average family. If unemployment benefits are not extended, 2 million people could lose their income. And wealthy people would pay far more in taxes.
“You end up tightening for everybody. You end up tightening for the middle class, for the unemployed, and you end up tightening for the top,” said Nigel Gault, an economist with IHS Global Insight. “Ideally, I would say don’t do any tightening in 2013.”
Democrats and some economists say there is a false choice between raising rates on the wealthy and extending measures to help reduce unemployment. They note that independent analyses show that raising upper-income taxes has relatively little effect on the economy while contributing a good deal to long-term deficit reduction.