Senate Majority Leader Harry Reid (D-NV) had hoped to bring a jobs bill to the Senate floor this week, but the snowfall that is still hammering DC has led to the cancellation of all congressional action for the moment. In the meantime, Reid is wrangling to pick up some Republican votes for the legislation, which the GOP is hinging on the inclusion of tax provisions, a promise on Reid’s part to address the estate tax in a timely fashion, and the exclusion of some spending initiatives.
But now some on the Democratic side are questioning the basic contours of the jobs bill, which according to a draft version that’s been circulating, is composed mainly of tax breaks to incentivize hiring and extensions of social safety net provisions (like unemployment benefits). House Speaker Nancy Pelosi (D-CA) is rightly questioning the efficacy of the hiring incentives, as “no one she’s consulted believes that the plan will actually lead to the creation of new jobs.” Sen. Sherrod Brown (D-OH) is also questioning the bill’s “heavy emphasis on tax breaks“:
“Why not think about things like taxing bonuses and send money directly into small-business loans?” Brown said. “Things like that we need to be talking about, not some of the same old, same old.”
Brown’s criticism sounds like that of Rep. George Miller (D-CA), who last week said that the jobs proposals before congress are “not adequate to the scope of the problem.” And notably absent from the Senate bill are aid to states and new infrastructure spending. Both of these measures could help spur additional job growth.
But more importantly, the economy is still suffering from a lack of demand. According to the latest National Federation of Independent Business small business survey, “shortage of customers” is the number one problem impeding small business hiring. And until those businesses feel secure that they will have customers for their products, they aren’t going to hire, no matter the various tax breaks.
Some sort of direct job creation, or using money to help national service organizations hire and increase their services, would put funds directly into the hands of consumers, who can then spend it and increase demand. Investments in clean energy could have the same effect.
Limiting the bill to tax breaks that will sit well with Republicans may be a worthwhile effort if bipartisanship is the ultimate goal. But we need to create 350,000 jobs per month for the next two years just to recover what we have lost since the recession began. Fixing the labor market is going to take a monumental effort, so this is no time to simply tweak at the margins with tax breaks that are questionable at best in terms of boosting employment.