Senators Max Baucus (D-MT) and Chuck Grassley (R-IA) have release a bipartisan jobs bill today. The bill is reported to include tax breaks for companies hiring new employees, money for highway construction, relief to private pensions and short-term extension of combat terrorism aspects of the Patriot Act. In addition it will extend unemployment benefits to many whose benefits ran out and still pay premiums on health insurance. While this is good news that bipartisan ship is not dead, it does beg the question if the items listed above will create jobs?
As I have been door knocking for my new business venture I have talked with other business owners in the area about how business is going and what some of their hurdles are. No once did I hear, "I wish I could hire more employees and have assistance with payroll." Rather what I have been hearing is that things are slow and inventory costs are a trouble spot. Plus, how does giving money to pensions and extending aspect of the Patriot Act create jobs? I look forward to hearing more about this bill and others floating around Congress. What can government do to really help create jobs? Or is it better for the Government to allow the private sector to increase/create jobs?
Do companies really care to get tax breaks when no one is buying their product? Obama's main problem of jobs is that deficits and trade gaps really are the culprit of this jobless recovery. The economy seems to be stabilizing but mainly because of all the jobs that corporations have shed.
ReplyDeleteAlso, some industries (like healthcare) are flourishing. What kind of a tax break to they receive when they have never really had a problem with hiring?
I read that this jobs bill will only cost $11 billion over 10 years so it really is a drop in the bucket and that extending unemployment benefits does help.
I agree with you that the economy is finally hitting the point where job loss will stabilize. The trouble is that the Obama Administration sees that the American Recovery Act is working and we are on our way to job creation. While unemployment is a lagging indicator, I do see the trends that companies are running as thin as they can.
ReplyDeleteGiving a company a tax credit to hire an employee or offer them a loan to increas payroll is insanity. In my door knocking for my business I have run across people that were just laid off in the healthcare industry as well.
How do you see extending unemployment benefits a help to the economy?
"Obama's main problem of jobs is that deficits and trade gaps really are the culprit of this jobless recovery."
ReplyDeleteThat statement is flawed because it's contradicting itself. Federal deficits have a positive impact on trade gaps by reducing the value of the currency and thereby making US products cheaper to sell overseas. If Obama addresses the deficit he raises the US $ value thereby increasing trade gaps. The inverse is true if he addresses the trade gap. Seems like an illogical argument then to say that Trade Gaps and Deficits are the cause of the jobless recovery. This is further buttressed by the fact that the US trade gap is more a function of consumption than it is production.
The fact is that US government cannot fix the job situation. Corporations must do that. The only levers the Gov has to influence them are carrots and sticks in the form of tax breaks/incentives.
In my opinion, the single greatest reason that the economy isn't adding jobs is consumer spending. For the first time in decades americans are back in the black with a positive savings rate. (THIS IS A GOOD THING) However, this means that those dollars are not going back into the marketplace to buy products which in turn means companies don't need to hire more staff to produce more widgets.
What it does mean is that banks are awash in bank reserves and are using these funds to make dangerous derivitive bets on the stock market rather than lending the money. That further impedes this economic situation because small businesses cannot get loans to grow their business because the banks can make 20%+ hedging bets on the market whereas they only make 4% in a loan.
The jobs bill is a start with the few things the government can do. And I'm glad that H. Reid took the shocking move of dumping the pork from it. The next thing the Gov should do is make short term, zero interest loans to small businesses directly. The third thing they should do is break banks into two elements savings/loan institutions that are federally guaranteed and proprietary investing institutions that are not. And never again allow lending institutions to become investing institutions. That would force banks to lend money again and stop playing dangerous games on the market with savings deposits which in turn endangers the economy again by putting the health of these institutions that are "too big to fail" at risk.
However, I don't expect these things to happen because banks have powerful lobbyists and the american public doesn't.
Kevin, I agree that the the repeal of the Glass-Stegall Act is the at the heart of the derivitive fiasco right along side the urban development programs that started back under Carter. The programs that believed that everyone has the right to own a home.
ReplyDeleteIf you want more money in consumers hands then lets move forward with my idea of a flat tax. As I have stated before the flat tax would not kick in until you earn the over $60K and then it would only tax each dollar above that. So, if you made $70K then you would only be taxed on $10K (70-60) at a flat rate. No more credits for mortgage, kids, education, etc...thoughts..