On The Hill
February 17th, 2010 | Published in News & Views
And There Goes Another $80 Billion…
By Autumn Dawson
After spending $862 billion on an economic stimulus bill one year ago that was guaranteed to lower the unemployment rate from 10 percent to 8 percent (The unemployment rate today is above 10 percent), our elected officials have now decided that another 80 billion will do the trick.
Only one little problem with this new plan: the bipartisan job bill currently coming out of the Senate doesn’t create that many jobs.
It would provide the President a badly needed legislative victory…at least until the end of the year, when it’s discovered that the new jobs bill hasn’t been any more successful than the massive stimulus bill. But I’m sure his speech writers are already working on a plausible excuse for that one. So not to worry.
Now, as to the proposed jobs bill emerging from the Senate: The plan would exempt businesses from paying a 6.2 percent Social Security tax on the wages of new employees, as long as the workers have been unemployed at least 60 days. Under the Senate plan, the tax break would run through the end of the year. In addition, if a new worker is kept on for a full year, companies could receive an additional $1,000 on their 2011 tax returns—where as Obama’s proposal called for a $5,000 tax credit for each new worker an employer hires this year.
And while tax credits sound lovely, tax experts and business leaders have said that companies are unlikely to hire workers just to receive a tax break. “We’re skeptical that it’s going to be a big job creator,” said Bill Rys, tax counsel for the National Federation of Independent Business. “There’s certainly nothing wrong with giving a tax break to a business that’s hired a new worker, especially in these tough times. But in terms of being an incentive to hire a lot of workers, we’re skeptical.”
The nonpartisan Congressional Budget Office recently concluded that such a tax break would generate only 8 to 18 full-time jobs per $1 million in tax breaks.
In addition to a tax break for hiring workers, the Senate package would extend unemployment payments for people without jobs for more than six months, as well as subsidies to help the jobless continue paying COBRA premiums (The same health insurance they would have been getting through their former employers).
It would also extend through 2010 roughly $31 billion in popular tax breaks that expired at the end of 2009. And although the tax cuts entice Republicans, there is still a good bit of skepticism that the bill would produce a great number of jobs. The bottom line being, why would an employer hire workers if there hasn’t been an increase need of production?
They won’t. Because before businesses start hiring, they need increased demand for their products, more work for their employees, and more revenue to pay those workers.
