FauxPolitik

Thursday, September 25, 2003

Jobs? TNR also gives Wesley Clark an A for domestic policy (grading on a curve again?) for his proposal to redirect $100 billion of tax cuts (the ones for the rich, note) into a tax credit for businesses that hire new workers. This is a "good idea" according to TNR, even though they implicitly admit that the policy is so ill-defined as to be, essentially, meaningless. (Note to candidates: To get TNR's endorsement, declare nebulous policies of questionable merit financed by reducing the tax cuts* -- works like a charm).

It's a bad idea, actually. First, it becomes another brick in the corporate welfare monument we're building in DC.

Second, no matter how it's structured, it encourages companies to hire the lowest-paid workers they can get away with, so that they can offset more of their payroll expense with tax credit. There are always unintended consequences of subsidy, and this will be no different. It reminds me of how fast food companies cash in on subsidies for workforce training programs. Never mind that the employees are trained to run the fry machine, which is not exactly an extra-industry-portable skill.

Third, and another unintended consequence, is that any indication that this policy will become a reality is an incentive to lay off workers a company might be carrying in anticipation of better days, which is a standard business bet on the odds of an improved economy (i.e., versus hiring and training costs later). If the company needs them later, they can be hired back -- with the hiring and training costs essentially subsidized by the government.

The bottom line is that, if the economy continues to improve, jobs will be created anyway, despite productivity gains that have cooled hiring. If the economy doesn't improve, companies won't be in the mood to hire anyway, even with the subsidy, since it nets as a payroll increase. And, because of productivity gains and a slow recovery, the work isn't there yet, which is another reason why companies will hire, say, another janitor, food service worker, or other low-wage employee. The manufacturing jobs will await increases in orders that overtake the increases in productivity.

* Let me take just a second to discuss this neologism, "reducing the tax cuts." The tax cuts have been voted for; they passed. It's not like we're still in committee here. They're law. We're really talking about tax increases, raising taxes, another round of wallet-hoovering, etc. The Democrats will talk about "reducing the tax cuts" until the last penny of those cuts goes into effect in 2009 (or whenever), still claiming that we could "save billions of dollars" (NB: "save" here means "spend"). This is a part of the continuing effort to turn tax cuts into a spending program, like a line item on the budget; an effort to make taxation the natural state of affairs, and to make it a national sacrifice of some sort for you to get any more of your own money in your paycheck at the end of the week.

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