In a CBO analysis of policy options for economic growth, payroll tax cuts ranked ahead of business tax cuts and infrastructure spending and behind aid to unemployed workers.
The payroll-tax cut puts money directly in the hands of consumers who are likely to spend it, said Ethan Pollack, a senior policy analyst at the Economic Policy Institute, a Washington group that favors ideas that benefit low- and middle- income workers.
“In the short run, we want additional consumer spending because that will create jobs and get the economy back on track,” said Pollack, who said he would prefer more aid to states and expanded unemployment insurance, both of which are more politically difficult. “If the question is, is it better to have the payroll-tax holiday or nothing, I would say it’s better to have it.”