You have to get right out of it, like out of all this mess. You’ll say yeah to anything, if you believe all this but don’t cry don’t do anything. Good advice for President Obama from the Psychedelic Furs as he once again gives America a bout of good speech.
Tonight the President will address a joint session of Congress in order to give what is likely nothing more than a stump speech touting his “jobs agenda.” Not that jobs (or rather the lack thereof) are not a very important issue right now. In fact, according to the US Department of Labor, the US economy generated an amazing zero net new jobs last month. While this statistic is somewhat questionable in that it discounted for the over 40,000 Verizon workers who were on strike, and because the survey used to generate these numbers does not really measure small business job creation very well, it does suggest that the economy is struggling to create employment opportunities for a growing population.
So what’s a President to do……..
Well in the case of what has been leaked so far about President Obama’s speech, not a whole heck of a lot. According to news sources the plan will feature the following laundry list of what are basically warmed over proposals that will not do much to generate long term benefits for the economy. I worry that the economic benefits of the Packers/Saints game will outstrip what is proposed in Washington. Nevertheless, here is what the pundits are saying the President will propose tonight:
A one-year extension of a payroll tax cut: Tax cuts are generally beneficial to the economy in that they transfer resources from non-productive government spending to more productive private spending; however, in the case of the Federal government that will be borrowing all of this money, the effect on the economy will be at best minor and temporary.
An extension of expiring jobless benefits: Even Joseph Schumpeter suggested that one of the key things that a government can do to help the economy during a recession is to provide temporary monetary relief to the unemployed. However, today, this temporary relief is no longer temporary – lasting for up to 2 years. While it is important to help stabilize families when a breadwinner loses their job, this sort of benefit is beginning to discourage the unemployed from taking lower paying jobs. By keeping wages higher than the market clearing level, long-term unemployment benefits actually reduce overall employment levels.
$30 billion in tax credits for businesses that hire the unemployed: Again, tax cuts are generally good for the economy; however, this proposal is for a minor credit that most small businesses will not be able to take, and would anyway cost most firms more in administrative costs than could be saved in tax reductions. Rather than complicating the tax code, if the President really wanted to create jobs, he would support one of a myriad of tax simplification proposals – from flat taxes to proposals to eliminate unproductive deductions – that have been proposed in the past few years.
New public works projects, such as school construction: In a low interest rate environment it can be reasonable for the government to invest in new infrastructure. If one wants to help generate new jobs, these infrastructure investments should be on things that help reduce business operating costs. Whether or not new schools do this is questionable, and I would suspect that this is more a give to the teachers’ unions than a move to increase productivity.
Direct aid to local governments will focus on stopping layoffs of teachers and first responders: Again, this is simply a transfer payment from one branch of government to another. Sending money to states may help keep teachers and firefighters employed, but does not create an net new jobs, as the money simply comes out of spending in the private sector.
A one year a tax break for businesses that allows them to deduct the full value of new equipment: Ok, we worked on getting this break into the first stimulus package, and accelerated depreciation does help push investment forward; however, just as with the tax break for hiring the unemployed, it would be better for the Federal government to reform the tax code so that investment is not a taxable event. Complicated and ever changing depreciation schedules create jobs for lawyers and tax accountants are not the best way to generate long term investment and future job growth.