(image: vintagecat)
I actually gave Harry Reid too much credit yesterday in counting up the remaining elements of the jobs bill. I said it would be a $50 billion bill, but the Section 179 fix allowing small businesses to write off capital expenditures would cost the government $35 MILLION, not $35 billion. So this is actually a $15 billion dollar bill to deal with a giant unemployment problem in a $13 trillion economy. I know this is the first step in a jobs agenda, but that’s not going to do a thing.
Senator Harry Reid, the Nevada Democrat and majority leader, said he would take four core job-creating initiatives from the bipartisan proposal — including tax breaks for businesses that hire unemployed workers and increased public works spending — and seek to move those rapidly through the Senate.
“We feel that the American people need a message,” Mr. Reid said. “The message that they need is that we’re doing something about jobs.”
Actually, they don’t need a message, they need jobs. And this won’t get it done.
Economists, journalists and commentators are pretty unified on this point. Actually, so is the Obama Administration.
Even the Obama administration acknowledges the legislation’s centerpiece – a tax cut for businesses that hire unemployed workers – would work only on the margins.
As for the bill’s effectiveness, tax experts and business leaders said companies are unlikely to hire workers just to receive a tax break. Before businesses start hiring, they need increased demand for their products, more work for their employees and more revenue to pay those workers.
The best CBO estimate of the impact of this measure says it would create between 104,000 and 234,000 jobs throughout the course of a year, a drop in the bucket.
But it could be worse than that. I asked Larry Mishel of the Economic Policy Institute to explain this further. He said that the Schumer-Hatch job creation tax credit, which would eliminate the 6.2% payroll tax for the employer for any hire of someone unemployed at least 60 days, and offer cash incentives to keep that person on the jobs past 2010, is fatally flawed. “Schumer-Hatch provides a credit for any hire. So, someone quits and is replaced, they get a credit. There’s tremendous turnover each year, with hires nearly 40% of employment. So this rewards activity almost all of which would occur anyway and means the credit is stretched very thin,” Mishel said. EPI actually supported a job creation tax credit, but theirs provided eight times as much money and would have had a much greater impact. The 6.2% of payroll may be too small to induce any hiring. Mishel concluded, “So, a small incentive, thinly spread with a complicated design. Yuch.”
As for the other pieces in the bill, the Section 179 write-off for capital expenditures is not seen as a job creator, “but business loves them,” said Mishel. The Build America Bonds leverage just $2 billion from the feds to state and local governments for infrastructure projects, and Mishel said that “It is hard to believe that $2 billion worth of help for bonds does much for jobs.” As for the one-year extension of the Highway Trust Fund, that actually adds $19.5 billion for other local infrastructure, even though the cost is netted out through some accounting maneuvers. So that’s a decent amount of spending. But it’s hard to imagine that the Trust Fund wouldn’t have been extended anyway.
If you’re charitable, you can say this is a $35 billion dollar jobs bill. But that’s not going to cut it.
“You can’t force companies to create jobs if they don’t need them,” said John Challenger, the president of Challenger, Gray & Christmas, a group that specializes in work force issues.
This would not provide the public spending to create the demand that would force the need for businesses to hire; it’s as simple as that.
And it’s not clear that this scaled-back bill will go very far. Reid is trying to “hotline” the bill, to get it to the floor immediately without going through committee, but that would require unanimous consent. He also wants to add one amendment which would extend some key policies set to expire on Feb. 28 by one week, presumably to give himself time to pass extensions of those policies in later bills. These include unemployment insurance, the Medicare “doc fix” and the COBRA subsidy, along with a few other priorities. But that would also require full consent, and given Chuck Grassley’s objections through the media, I don’t see that happening:
“Senator Reid’s announcement sends a message that he wants to go partisan and blame Republicans when Senator Grassley and others were trying to find common ground on solutions to help get the economy back on track and people back to work,” said Jill Kozeny, a spokesperson for Grassley.
Kozeny added that Reid killed the bill just as it was gaining bipartisan momentum.
“Senator Reid did this just as Republican senators were saying they liked things in the Baucus-Grassley draft, which would have prevented billions of dollars in tax increases and offset any spending,” she said. “The Majority Leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis.”
So, a tiny bill, too small to do very much, that nonetheless probably won’t get through.
Lovin’ this Congress.
