The July employment report finds the economy treading water. The establishment survey suggests that employers created 163,000 new jobs, barely enough to keep pace with population growth. But the household survey showed a 195,000 drop in jobs, leading to an increase in the unemployment rate to 8.3 percent even as labor force participation fell again. Coupled with weak economic growth in the second quarter, the report is a warning signal to policymakers in Washington. The economy cannot afford the prospects of nearly $500 billion in tax increases on middle-class families, investors, and job creators that are scheduled for the beginning of the year. Congress should act quickly to prevent taxes from rising and instead close the deficit by reducing spending.