When it comes to job creation, federal program is all cost and no benefit
President Ronald Reagan said, “There is nothing so permanent as a temporary government program.” President Barack Obama is not straining to prove him wrong.
Last winter, Obama persuaded Congress to give businesses a bonus for hiring people who had been out of work for 60 days or more. HIRE, for Hiring Incentives to Restore Employment, was supposed to stimulate job creation and add some juice to a gasping economy. In practice, it doesn’t seem to have worked. So what does the administration want to do? You guessed it: extend the program. The initiative was supposed to cost $13.5 bil- lion, but far fewer companies have made use of it than expected, so the tab has come to $8.5 billion. The Treasury Department thinks employers must not be aware of the incentives being offered: an exemption from the employer’s share of Social Security payroll taxes for the rest of 2010 and a $1,000 tax credit for each worker who is kept on for at least a year.
Maybe employers don’t know, but in an economy in which every nickel counts, it’s more likely they just don’t care. The incentives are too small to overcome all the woes facing managers: sluggish growth, huge budget deficits that portend tax increases later on, the cost of implementing health care reform and what the U.S. Chamber of Commerce calls “the unbelievable amount of new regulation that is in the pipeline.”
The Treasury Department says 4.5 million people hired between February and May qualify for the benefits, but it doesn’t know if they would have been hired regardless. Their employment may just be attributable to economic growth.
Or the credit may simply induce them to take on Worker A, who has been out of work three months, rather than the slightly more qualified Worker B, who lost his previous job just six weeks ago. Again: all cost and no benefit.
That’s not to say the administration shouldn’t promote job creation. But it can’t do much good with micro efforts like this program, which pale next to the current disincentives to hiring.
It would be far more helpful to scour the Federal Register to eliminate regulations that have outlived their usefulness or cost more than they’re worth. Cutting spending to diminish future tax increases would also give employers greater confidence that investments they make in workers will pay off in the long run.
Obama seems to think clever tax gimmicks can put the long-term unemployed back to work. But in this case, the best thing the federal government can do is not get in the way.