If there’s one thing that both parties in Congress can agree on, it’s that any hope for economic recovery is going to hinge on getting unemployment under control. At the end of 2009, one out of every ten Americans able to work wasn’t working.
Fortunately, there’s some good news. Last month, the national unemployment rate dropped to 9.7%, the lowest since August. In addition, the manufacturing sector added jobs for the first time in three years.
It’s certainly encouraging but likely not enough to signify a recovery. That’s why Democrats and Republicans are working together to get a jobs bill passed this week. The bill will provide a tax break for companies who hire unemployed workers; the measure would exempt companies from paying the employer’s share of Social Security payroll taxes for new workers so long as those new employees had previously been unemployed at least 60 days. That’s equivalent to a 6.2% reduction in overhead costs for a small business. If it passes, it would be a substitute for Obama’s proposed $5,000 tax credit for small businesses who commit to new hires. The Senate plan is cheaper and considered less likely to be abused than Obama’s version.
While it looks likely that the Senate will pass some version of the bill, it’s not so certain in the House. Reportedly, a number of Representatives doubt the efficacy of a bill which creates jobs if there are no consumers willing to buy goods and services. I have one question for them: what do you suggest instead? It’s awfully easy to sit back and try nothing. After all, our good friends in Congress are employed – to the tune of $174,000 per year. Speaker of the House Nancy Pelosi (D-CA) takes home $223,500. Majority Leader Steny H. Hoyer (D-MD) and Minority Leader John Boehner (R-OH) each take home $193,400. Oh, and did I mention the benefits?
So, it’s of course it’s easy for members of the House to sit back with a “it’s not going to work” attitude without even giving it a go. They have no clue.
I’m not in Congress but I do own a business. And here’s the thing: our economy is very interdependent. I don’t buy the idea that giving the top more money will help everyone down the line any more than I buy the idea that the failure to buy goods or services at the bottom creates a standstill to the top. It’s not a straight line and it’s not a simple equation. It’s complicated. Financial incentives matter. If I could expand my business capacity with limited overhead, I would. And I think most small businesses would.
Why makes the House think they know better? And what do they have to lose by saying yes? It won’t cost them anything upfront and it would only apply if businesses actually made a new hire (which would, in turn, reduce unemployment payments). So, no hire, no cost. And it’s not a refundable credit, so nobody’s getting anything that they didn’t pay in. It’s a tax cut but for taxes associated with costs and not directly tied to profits. So it’s not a blanket tax cut – it’s a tax cut specific to businesses who create jobs. That feels like a good thing.
Last year, Idaho paid out more than $500 million in federal unemployment benefits. Georgia paid out $1.6 billion. We’re already bleeding money to pay for those who are unemployed. Why not try something new and try to kick start the economy by something other than simply throwing money at it with our eyes closed? Your thoughts?
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