The White House seems well aware that the upcoming Presidential election will pivot on the economy — and more specifically, the unemployment rate. Prospects for a spontaneous burst of growth are too dim to see with the naked eye.
But the President and his people are understandably wary of proposing anything that could be labeled stimulus spending.
Facts notwithstanding, the Republicans seem to have convinced a majority of Americans that the economic recovery act failed. Also that Congress must cut federal spending now to begin dealing with the deficit.
But tax cuts are good, right? At least so long as they benefit us.
Republicans continue to insist that cutting businesses taxes will create jobs — though we need big cuts in spending and regulations too.
For his part, the President seems eager to prove that he’s listening to business leaders, who, of course, would like lower taxes.
Not so eager, however, as to support another “tax holiday” that would let multi-national corporations bring foreign earnings home at a drastically lower rate. Or at least, say Treasury officials, not unless the giveaway is part of a broader tax reform package. In short, not right now.
Best of all, it can be cited to show that the President has done something about the jobs crisis.
I’m no economist. But when I read about the payroll tax holiday, I said to myself, it’s not going to get businesses hiring people they wouldn’t have hired anyway.
Businesses aren’t holding back on new hires because they feel they can’t afford the additional 7.65% they’d have to pay on top of the wages.
They’re not hiring because their current workforce is sufficient — if not more than sufficient — to meet the demand for their products and services.
Corporations are sitting on a pile of dough. If they wanted to hire here in the U.S., they would. Small businesses — those putative engines of job growth — are shrinking their payrolls. And a short-term nick in labor costs won’t stop them — let alone get them hiring again.
“I hire workers to do jobs,” says the president of a North Carolina graphics firm. “If we don’t have the work coming in, nothing will make me hire another worker.”
In any event, businesses are adding jobs, though at a pretty sluggish pace. The unemployment rate isn’t budging because state and local governments are still shedding jobs — another 30,000 in the month of May.
A payroll tax holiday won’t save one of them. Another round of fiscal aid to the states could. But a proposal for that would be DOA in Congress.
The Atlantic‘s Daniel Inviglio has some other ideas. Maybe a couple of these would fly. Maybe they’d step up hiring a bit.
But the Economic Policy Institute tells us that the economy would have to create 11 million jobs for the unemployment rate to settle back to its pre-recession rate.
This figure keeps growing as the labor market fails to make up for the many millions of jobs lost and add enough to keep up with the increasing number of youth who’ve become old enough for full-time work.
Those who don’t get jobs soon are likely to face years of lower earnings and future unemployment. And they generally don’t have much by way of safety net supports to tide them over while they’re looking.
People at the other end of the working-age range may be left on the sidelines, even if jobs proliferate faster than anyone expects.
So we’ve got a complex policy problem that I don’t think anyone in Washington wants to confront. It’s bigger than how to create a whole lot more jobs quickly. Bigger than how to rapidly retrofit workers whose jobs aren’t coming back.
I don’t have the glimmer of an answer. But I’m sure as can be that an employer payroll tax holiday isn’t it.
Also sure as can be that the President’s in trouble if he doesn’t come out with a plan that gives us some hope we can believe in.