Payroll Tax Cut is a Pain Killer for the Economy, Not a Cure

"When is tax policy like a football game"? Well, "never," seems like a pretty good answer. Unfortunately, with the payroll tax debate in Washington we are seeing one dangerous similarity—call it playing through the pain with pharmaceutical help. This similarity occurred to me not because I worked for a member of the Senate Republican leadership who served on the Finance Committee, but because we have several sons who have played their share of sports at the high school and (now) college level.

[Read the U.S. News debate: Should the payroll tax cuts be extended?]

Injury is an unfortunate reality in high contact sports like football, lacrosse, and wrestling. Fortunately, athletes these days are less often encouraged to "play through the pain." But back in the day—and one suspects perhaps still in the NFL—athletes were encouraged to play while injured, often with the aid of pain killers. One imagines that short-term thinking overrules better long-term judgment in these situations. The bottom line: if you play on an injured shoulder ankle or knee, it's only going to worse. And that's the analogy to tax policy.

The payroll tax cut is a pain killer, not a cure, and misunderstanding the difference could leave our economy even more injured. The approximately $1,000 per family temporary payroll tax cut will lessen the economic pain of many by putting a little more money in the pockets of the underemployed and those families who are still paying down debt. But if we buy this pain killer at the cost of further injuring the economy, which is exactly the prescription of Senate Democrats who want to pay for it by raising taxes on job creators, we will end up losing a season of prosperity instead of a game.

[Check out a roundup of editorial cartoons on the economy.]

Interestingly, if we cut the payroll tax without cutting spending (and, in this particular case, Social Security benefits) it exposes the widely touted myth that Social Security can't be reformed because people have "paid for it." It would be ironic if hindsight has us crediting President Obama as the leader who made Social Security reform possible by severing the connection between benefits and revenue.

In general, I'm strongly in favor of hard-working Americans keeping more of the money they have earned. However, as many experts have noted, short term tax cuts bring some relief right away, but their very transience precludes any real stimulative effect on the economy. If coupled with a tax increase on thousands of job creators, the impact is a clear loser. Republicans and some Democrats are responsibly noting that refilling this "prescription" with such a tax increase is a mistake our struggling economy cannot afford. Substituting temporary tax relief for families already working is of little comfort for the millions who need a job.

• See Mort Zuckerman's 5 Ways to Create More Jobs.
• Read the U.S. News debate on the flat tax.
• See the 10 best cities to find a job