BOOSTING THE JOB MARKET…. The appetite on the Hill for another stimulus package is practically non-existent. Support is growing, however, for a new employment tax credit.
The idea of a tax credit for companies that create new jobs, something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation.
The proposal has some bipartisan appeal among politicians eager both to help their unemployed constituents and to encourage small-business development. Legislators on Capitol Hill and President Obama’s economic team have been quietly researching the policy for several weeks.
“There is a lot of traction for this kind of idea,” said Representative Eric Cantor of Virginia, the Republican whip. “If the White House will take the lead on this, I’m fairly positive it would be welcomed in a bipartisan fashion.”
In addition to the economists working on the proposal, some heavyweights support the concept, including the Nobel laureate Edmund S. Phelps, Dani Rodrik of Harvard and former Labor Secretary Robert B. Reich.
Phelps and Reich agreeing on a job-creation idea isn’t that unusual. Seeing Cantor agree with them, however, is bound to raise eyebrows.
Tim Fernholz presents the case for the proposal, and highlights the larger political dynamic.
Basically, the tax credit would provide subsidies for the salaries of new hires in an effort to spur job growth. Getting it over the line now is key, since the government wants to get it in place before the economy starts to swing back into gear, but not take so much time doing it that employers delay hiring in anticipation of the subsidy. There are also plenty of concerns about loopholes and corporate welfare, but if the law is written the right way this might be something worth getting behind. Especially if Republicans will vote for something that might help lower unemployment.
By some measures, the tax credit would cost about $20,000 for each job created, with the target goal of creating about 2 million jobs.
There’s no word yet on financing the $40 billion proposal.
I should add that the proposal may sound familiar — President Obama promoted the idea during the debate over the stimulus bill, but the measure was scrapped by Congress.