Between the sequester spending cuts and the payroll tax rate going back up by 2 percentage points, I'm expecting a decline in nominal GDP of as much as 41%.
The sequester cuts come to $85 billion.
The payroll tax hike will remove conservatively $96 billion from American paychecks. Based on payrolls in 2011 of $6,239 billion, about $1,459 billion was exempt from Social Security taxation. Taking 2% of the remaining $4,780 billion yields a payroll tax hike of $95.6 billion using 2011 payrolls, the last available from SocialSecurity.gov.
Nominal GDP increased between October 2008 and October 2012 by $1,769.5 billion. That's been an average of $442 billion a year, nominal, over the last four years.
Subtracting the sequester cuts and the payroll tax increase (conservatively $181 billion) from that means cutting nominal GDP by about 41%.
