Still Losing Jobs
• Stimulus Failed: Obama's first $862 billion stimulus bill was supposed to create 3.5 million jobs by the end of 2010, but since it passed in February 2009, 3.3 million Americans have been put out of work. The unemployment rate hovers around 10%, and businesses continue to shed jobs, including 20,000 more lost in January.
• Second Stimulus: Congress is now considering yet another multi-billion-dollar stimulus that features tax breaks for businesses that hire new workers. The House of Representatives passed its bill in December 2009. The Senate voted recently to limit debate on its plan and will soon vote on final passage. After that, the House will have to vote on the Senate bill, or a conference committee must be formed to reconcile the differences in the two bills.
More Spending Won't Create Jobs
• Payroll Holiday and Credit: The centerpiece of the Senate plan suspends the 6.2% employer portion of the payroll tax that funds Social Security for businesses that hire workers who have been out of work for at least 60 days. The plan also gives businesses an additional $1,000 tax credit for every new employee they keep on payroll for one year. These provisions will likely remain in a final bill if one emerges from Congress.
• No New Jobs: The impact of these temporary incentives will be minimal because many of the employers that will receive the benefits would have added workers anyway.
• Could Reduce Employment: Funding job creation programs will require new government borrowing, but borrowing takes money out of private hands, causing jobs that private money would have sustained to disappear. In fact, when the jobs destroyed by the borrowing are subtracted from the few new jobs created, the net effect could be a reduction in employment.
• No Long-Term Jobs: Any jobs the payroll tax holiday and credit do create will likely be temporary--once the policies expire, additional workers will probably be let go.
• Transforms Social Security: Congress will need to replace the lost Social Security Trust Fund revenue due to the payroll tax holiday with a transfer from general revenue. This would begin a transformation of Social Security from an earned benefit paid for by workers and employers into one paid like welfare programs.
• Agenda-Slowing Job Creation: Congress is continually threatening businesses with new taxes and more regulation. This creates great uncertainty over rising costs for entrepreneurs who want to hire workers or create new enterprises. A small, temporary credit will do nothing to overcome the job-killing agenda coming out of Washington.
• Stop Threatening Growth: Congress should drop its plans for higher taxes and more regulation. If it did so, businesses and individuals would get off the sidelines quickly and start investing again even without short-term tax gimmicks.
• Lower Taxes: Washington can encourage growth by cutting spending so it can further lower taxes in a way that will actually encourage economic growth and spur job creation. A short-term credit will do nothing to get businesses hiring, but reductions of marginal tax rates for businesses, individuals and investing will provide long-term incentives that will pave the way for real job creation.
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