Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

The federal “jobs” bill is just more government waste!

Posted by sanityinjection on February 11, 2010

From the same folks who brought you the wildly successful federal stimulus bill, now get ready for the new federal jobs bill, intended to address the biggest problem facing the American economy right now: high unemployment. Cost? $10 billion – a real bargain compared to the last boondoggle. Trouble is, it doesn’t do what it’s supposed to do.

The theory is that properly designed federal legislation can provide incentives for private sector companies to hire more workers, thereby decreasing unemployment and strengthening the economy. And there is nothing wrong about that – in theory.

The problem comes when you try to make it work in practice. For that $10 billion cost, the estimated number of jobs the legislation is expected to create is only 80,000 to 180,000. Meanwhile, since the start of the recession, the economy has lost 8.4 million jobs.

If you do the math, using the most optimistic figure of 180,000 jobs, the cost for creating each job is about $55,500. In other words, the program creates jobs by essentially paying the first year of the job’s salary with taxpayer dollars. (Not quite, actually, as some of the spending doesn’t go to the companies but covers the government’s costs to oversee the program.) But since the federal incentives go away after the first year, what do you think a smart business owner is going to do? He’s going to hire the person, let the government pay the salary, then lay the person off after a year when the incentives go away and he can’t afford it anymore – resulting in no permanent job creation at all.

Of course, the counter-argument is that after a year’s time the economy will have improved enough that the business will be in better shape to afford to add the worker on their own dime. That, however, is contrary to most economic forecasts which suggest that the effects of this recession will be with us for at least the next two years or so.

So, while well-intentioned (and even negotiated in a bipartisan fashion, mirabile dictu!), what this bill ultimately does is waste $10 billion of the taxpayers’ money. It’s a good example of how well-meaning legislation can actually end up having a negative impact. Of course, the Republicans who vote against it will be immediately tarred by the President and the media as “do-nothings” and “obstructionists”. Here’s hoping they have the courage to do the right thing in spite of the criticism.

If the federal government *really* wants to create jobs, it should stop trying to cleverly incentivize businesses to do what they don’t want to do. Instead, it should get out of the way. Cut the capital gains tax, which will encourage more private investment in companies so that they will have the funding to add jobs where there are real jobs to be done. Also cut the corporate tax so that more companies will stay in the US or relocate here, thus preserving existing jobs for Americans and hopefully adding new ones.

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3 Responses to “The federal “jobs” bill is just more government waste!”

  1. I-love-things-that-sparkle said

    Isn’t “more government waste” a reduntant statement? πŸ™‚

  2. This article in USA Today explains some of the reasons why the federal government’s efforts at job creation tend to be inefficient and costly:

    http://www.usatoday.com/news/washington/2010-02-24-stim-jobs_N.htm

    The obvious alternative is to make policy that helps small businesses thrive and grow, which will automatically create new jobs. But this takes longer, and it’s harder for politicians to take the credit for it.

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