Democrats Considering Another Failed Carter Policy
And here I thought the Age Of Obama was supposed to be about new ideas, not old ones. The Wall Street Journal explains:
Alarmed by the rising jobless rate, Democrats are scrambling to “do something” to create jobs. You may have thought that was supposed to be the point of February’s $780 billion stimulus plan, and indeed it was. White House economists Christina Romer and Jared Bernstein estimated at the time that the spending blowout would keep the jobless rate below 8%.
This explains why political panic is beginning to set in, and various panicky ideas to create more jobs are suddenly in play. The New York Times reports that one plan would grant a $3,000 tax credit to employers for each new hire in 2010. Under another, two-year plan, employers would receive a credit in the first year equal to 15.3% of the cost of adding a new worker, an amount that would be reduced to 10.2% in the second year and then phased out entirely. Why 15.3%? Presumably because that’s roughly the cost of the payroll tax burden to hire a new worker.
The irony of this is remarkable, considering the costs that Democrats are busy imposing on job creation. Congress raised the minimum wage again in July, a direct slam at low-skilled and young workers. The black teen jobless rate has since climbed to 50.4% from 39.2% in two months. Congress is also moving ahead with a mountain of new mandates, from mandatory paid leave to the House’s health-care payroll surtax of 5.4%. All of these policy changes give pause to employers as they contemplate the cost of new hires—a reality that Democrats are tacitly admitting as they now plot to find ways to offset those higher costs.
Okay, temporary tax credit, conservatives should be overjoyed, right?
Congress doesn’t want to give up revenue for very long, so it would make the tax credits temporary. Thus anyone who is hired would have to be productive enough to justify the wage or salary after the tax-credit expires—or else the job is likely to end. An employer would be better off hiring a temp worker and saving on the benefits for the same couple of years.
In other words, in order to justify hiring full-time permanent workers, we need a full-time permanent tax cut on employment… which is probably the one thing the current crop of leftist Democrats will never do.
Anyway, back to the “new policies” meme… turns out this has been tried before.
We know all this because a new jobs tax credit has already been tried—in the Carter Administration. In 1977 as he entered the White House, Jimmy Carter proposed a jobs credit and a Democratic Congress passed it. Its unfortunate history was recounted in 1980 by then-Treasury official Emil Sunley in a chapter of “The Economics of Taxation,” a book edited by Henry Aaron and Michael Boskin for the Brookings Institution.
As Mr. Sunley summarized: “The impact of the credit on jobs was slight. In many firms those who make hiring decisions did not understand the firm’s tax status.” He added that, “Because the capital stock is fixed in the short run, to increase employment significantly, demand for output must increase. An incremental tax cut tied to employment will not by itself generate that increase in demand. Moreover, a temporary incremental credit is unlikely to affect significantly the long-run substitution of labor for capital.” Call this Job Creation 101.
In other words, in their mad scramble to save the economy from their own failed stimulus–which, remember, we were told was needed to keep unemployment from going over 8%–they are reaching back to a policy that was tried during Jimmy Carter’s “stagflation” era, and which was a dismal failure.
Of course, this shouldn’t surprise anyone who doesn’t believe that history “reset” on 20 January 2009. We saw it with the stimulus, which had been tried by various other countries, including Japan, who tried it for over 10 years. We see it with their attempt to ram socialized medicine down our throats, which failed miserably under the Clintons. We see it in the “make nice” stance to terrorists, including Iran, which held our citizens hostage for 444 days under Mr. Carter.
As the Bible says in Ecclesiastes 1 (NKJV):
9 That which has been is what will be,
That which is done is what will be done,
And there is nothing new under the sun.
10 Is there anything of which it may be said,
“ See, this is new”?
It has already been in ancient times before us.
11 There is no remembrance of former things,
Nor will there be any remembrance of things that are to come
By those who will come after.