An Early Reaction to the Tax Deal

Early reports about today's deal over tax cuts and other economic legislation in the lame duck session reveal that a two-percent cut in the payroll tax is to be included for one year. This is indeed a positive development. Based on Rob Shapiro's long standing advocacy for a cut in the payroll tax in order to spur job creation, Rob, Simon Rosenberg, and I wrote a memo over the summer advocating a one year payroll tax cut. Indeed, the Congressional Budget Office has said that a payroll tax cut is the most effective measure for job creation. 

If today is any indication (and it is, this is a mathematical reality), the next two years are going to be difficult for those elected on the promise of cutting taxes and cutting the deficit. The fact is that you just can't do both at the same time. Policymaking is about setting priorities, and right now creating jobs and growing the economy have to be at the top of the list.