President Obama's plan to extend the payroll tax holiday may be rationalized as a way to offset other changes that raise taxes for working people. But as a way of stimulating growth or encouraging hiring, it looks like a bad bet.
The cut took effect without much notice at the beginning of this year, reducing your share of payroll taxes from 6.2 percent to 4.2 percent. Judging from how the economy has performed this year, it hasn't had any noticeable effect.
And there is no reason to think it will if we extend it. Research indicates that when people get temporary tax rebates or cuts, they don't spend the money. They save it or pay off existing debts -- neither of which stimulates demand by generating the purchase of goods and services. It's entirely possible that the extra money in paychecks won't cause any hiring.
Even if the tax break does some good, it does so at a high price in lost revenue. A study by Macroeconomic Advisers says the extension will create 400,000 jobs -- at a cost of $120 billion. That works out to $300,000 per job, which is a lot more than they would pay.
If that's the best the administration can do with such a large tax expenditure, better to just save the revenue. Wasting money is no way to fix the economy.