I listened to the Obama speech, and at least he showed some energy (although this bipartisan shit clearly doesn’t work and I don’t know when he’s going to give it up). But here’s what makes me crazy: The whole point of this $447 billion stimulus is to create jobs. Why not just, you know, create jobs?
I agree that a cut in the payroll tax (which, for a lot of working Americans, amounts to more money than the income tax) will put money in the pockets of people who are likely to spend it, and will stimulate, to some extent, consumer demand. That, of course, is the crux of the issue — unless there’s demand for goods and services, the economy’s not going to turn around.
Of course, some of that money will go to replenish savings and pay down debt — not a bad thing, but not what we need right now.
Cutting the payroll tax for businesses will also be a direct stimulus, particularly for smaller employers, who create most of the new jobs. But again, let’s be real: I just ran the numbers, and a company the size of the Guardian would get enough of a tax break to hire one part-time person at not much more than the city’s minimum wage. Sure, you spread that across millions of small businesses, and you’ll get some new job creation. But I wonder: Is this the most efficent way to achieve the objective?
Let’s see. An economist at Moody’s says the plan could create 1.9 million jobs. That, of course, includes not just the jobs created by the tax cuts, but the multiplier effect (you hire someone to dig a ditch, that person buys shoes so the shoestore needs more help, etc.) And the prediction is just that — a prediction. It assumes, for example, that most of the employers who get the tax break will use the extra money to hire more people. I’m not so sure about that. Businesses tend to hire not because they have spare cash (which might just as well end up in the owner’s pocket) but because they need more workers to meet growing demand for goods and services. If that demand isn’t there, the jobs won’t magically appear just because employers have more cash on hand. (In fact, some of the biggest employers in this country have plenty of cash on hand; they aren’t using it to hire anyone.)
How about we try it another way? Let’s assume that $50,000 a year is a decent wage in most parts of the country. (You want to make it $60,000? Whatever. It just changes the calculus a little bit).
For $1 million, you can hire 20 people at $50K. For $1billion, you can hire 20,000 people. For $400 billion, you can hire 800,000 people.
Why not just do that? Why not take that stimulus money and hire public employees — to teach in schools, to build roads and bridges, to repair the nation’s electricity infrastructure, to construct high-speed rail lines, to rebuild crumbling housing in inner cities …. there’s plenty to do.
Yeah, some of the money would go to the dreaded “bureacrats” who would oversee the hiring programs and fill out the forms. But the world needs accountants and managers, too — and the ranks of the unemployed include quite a few people with those skills.
Now: There’s lots of debate about the size of the multiplier; when it comes to job creations, I’ve heard numbers from 1.4 to 5.0, depending on the circumstances. But there’s no doubt that direct federal hiring — 800,000 new living-wage jobs — would have a direct impact on consumer demand and create a guaranteed need for more private-sector workers. I’d bet it’s about one for one — the 800,000 federal jobs would lead to another 800,000 private-sector jobs. That’s 1.6 million jobs — and unlike the current plan, those are jobs that are not dependent on what employers decide to do with their tax breaks.
Hell, we want to cut unemployment in half? For, say, $1.5 trillion, you could create 7 million jobs pretty easily. That’s just about the annual cost of the wars in Iraq and Afghanistan.
The government knows how to create jobs. Federal, state and local agencies hire people every day. The whole thing seems so silly; why give money to private employers and hope for the best when you can use the same money to hire people directly? Why waste time and money on the middleman?