By PAUL WISEMAN and JEANNINE AVERSA
AP Economic Writers
WASHINGTON – The tax deal struck by President Barack Obama and congressional Republicans essentially gives Americans a pay raise – pumping money into the economy almost immediately and probably creating hundreds of thousands of jobs over the next two years, economists say.
The compromise already has economists raising their forecasts for growth next year, mainly because it includes a surprising one-year cut in Social Security taxes. The amount of that cut – 2 percent of pay for most American workers – instantly becomes more take-home money. Critics complain that the deal would further swell the $1.3 trillion federal budget deficit.
Two central parts of the agreement extend income-tax cuts that would have expired Dec. 31 and renew benefits for the long-term unemployed. Those were both expected. But they still give a psychological boost to shoppers in the midst of the holiday shopping season.