The Senate Jobs Bill A Bad Idea that Could Cost You Your Job

Once again some old ideas are being repackaged and "unveiled" as the jobs bill. One would expect (or at least hope) that there might be something somewhere in there that might actually create jobs. But once again all we have is a bill with a nice sounding name but no real substance, plenty of totally unrelated add-ons, and one really nasty possibility for an unintended consequence.

It would be nice if our "transparent" regime were to actually release the jobs bill so we could all see it but we know better than to expect that. There are some copies of the jobs bill circulating among the press and of course the rumors are flying but let's talk about what we know is out there.

Let's start with the part that should keep you up at night - If you already have a job that is

Both Obama and the senate bill agree on one thing: giving some sort of tax break to businesses that hire people who are already unemployed. The senate jobs bill exempts small businesses from paying payroll taxes this year for any newly hired worked as long as they had been unemployed for at least sixty days. It offers a further $1,000 tax credit if you keep them employed for at least a year. On the surface this sounds good, who can argue with giving employers incentives to hire people?

If you already have a job, you should be the one arguing against it or pretty soon you may be the one without a job. The easier you are to replace, the harder you should fight this. Here's why...

Imagine you are a manager or a small business owner. Imagine you have an easily replaceable workforce so you know that you can hire a new employee and train them fairly quickly. You also know that somebody who is unemployed may be willing to work for less anyway. Now the government comes and gives you a way to cut your payroll by 6.2% plus a $1,000 for each worker you swap for one who has been unemployed. Would you do it? Would you at least be less willing to put up with employee problems and be quicker to get rid of somebody? (Don't forget that fired workers are generally NOT eligible for unemployment benefits). What do you think your boss will do?

Some people may not think something like this could happen but how many jobs have we seen go overseas? How many times have we seen employers encouraging their (more expensive) older workers to retire early? I don't doubt for a second that this can't happen.

Why They Think The Tax Credits Will Work and Why They Are Wrong

Still not convinced? Here's another way to look at it. The theory behind this is that if more people are working they will be able to spend more money and that creates more demand for jobs. The problem is that this jobs bill does nothing to increase overall demand for any products or services. Yes, the newly employed workers may have more money to spend but the newly fired will have less. So the net effect is zero.

The only real way to create jobs is to do something that actually increases the demand for goods or services which must be supplied by additional employees. Reducing costs does not increase demand. For tax cuts to work they need to be focused on consumers that have jobs and have money to spend.

Other Odds and Ends In The Bill

In typical government fashion they have seen fit to bundle this with a variety of items some loosely related to jobs and some don't have any apparent reason to be in there. Of course keep in mind we haven't actually been blessed with the actual bill yet.

The bill includes some things that just need to get done such as extensions for renewal of several tax cuts that expired last year. The last thing we need to do is raise taxes at this point, or ever but that's a different story.

Some reports are a little odder. For example KPCC Southern California Radio reports that it includes an extension of the Patriot Act, not quite sure what that has to do with jobs.

Another odd example is that Reuters is reporting that the jobs bill includes a delay in a twenty percent cut in medicare payments along with reviving the biodiesel tax credit. The only jobs that seems to be related to is a few lobbyist jobs.

So If It Won't Work Why Are They Pushing It?
Simple, the democrats need to be able to say they did "something" for jobs growth. The results of the Massachusetts election sent a clear message: Stop messing around with your liberal agenda and do something about jobs!

Passing the jobs bill will allow them to be able to show "progress" without really much effort. With all the focus being place on jobs it will probably pass, too bad it isn't real progress and may even do much more damage than good.

Sources
Tami Luhby, "Senate jobs bill: What's Missing", CNNMoney.com
"Senate jobs bill extends Medicare payment rates - text", Reuters

Kity Felde, "Senator Dianne Feinstein supports extension of Patriot act included in jobs bill", Southern California Public Radio

Charles Abbott, "Senate jobs bill to revive U.S. biodiesel tax credit", Reuters