Advertisement

Tax-Side Stimulus

Looks like the powers that be are finally starting to try to frame additional economic stimulus measures, specifically a tax credit to incentivize new hiring:

One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.

“It’s beautiful if it can be timed at a dire moment like this, when unemployment is way too high and appears to be going somewhat higher,” said Mr. Phelps, an economics professor at Columbia, lamenting that the president dropped it from the $787 billion stimulus plan approved in February. “But it’s a pity that this wasn’t done a year ago.”

This seems like an okay idea to me, but dollar-per-dollar I don’t see any real reason to think that this relatively complicated scheme is in any real way preferable to just temporarily reducing payroll taxes. Among other things, a new jobs tax credit is somewhat pointlessly asymmetrical between creating incentives to reduce layoffs and creating incentives to hire new people. It also seems to me that it would be desirable to do something that can be seen as offering help to almost all families, rather than to something so narrowly targeted.

Advertisement

It also strikes me that some old-fashioned public works schemes could do some good here. There are cracked sidewalks in the United States of America and roads with potholes in them. There are also unemployed people who until recently were involved in the building trades. Is it really so impossible to hire those people to fix the potholes and the cracked sidewalks? This seems like common sense to me.