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Deal on payroll tax cut looks promising, though imperfect

February 14, 2012 - Mike Maneval
It appears as of Valentine's Day that the leadership of the Republican caucus in the U.S. House has reached a deal on etending the payroll tax cut. While — from initial appearances — the deal is imperfect, it still is a smart compromise.

The deal extends the payroll tax cut through the end of the year, adding its costs to the debt and deficit rather than supplanting other federal spending. An extension of unemployment benefits, however, is funded, partially through cuts in employer contributions to federal workers' pensions, and partially with new revenues through auctioning additional broadcast spectrum.

The compromise's greatest strength may be how it shuffles priorities, placing concerns about the debt and deficits right where they belong: In the middle. Specifically, as a lower priority than tax relief for working families, but a higher priority than an unheralded extension to benefits already extended several times. While the unemployment insurance program is an important protection in the U.S. economy, a day may come when these unfunded extensions may lend themselves to claims the program is a drain on the federal budget, allowing critics of labor rights to weaken it.

And while the compromise would be much better if the payroll tax cut was made permanant, or if public assistance programs — any one or any combination of them from Medicare Part D to Social Security to food stamp programs — were cut rather than compensation for work, the deal possibly reached Tuesday would continue to deliver tax relief to the working consumers who create jobs by purchasing goods and services. It's not only good economics, but the right message to send America on the value and importance of hard work.


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