Schumer-Hatch: Money for Nothing
It's great that the Senate is prepared to do something to help create jobs. Unfortunately, its most likely course of action, the Schumer-Hatch tax credit will probably create almost no jobs.
The basic deal with Schumer-Hatch is provide a tax credit equal to the 6.2 percent employer side of the Social Security tax. This credit would last for the rest of 2010. If the employee is kept on the payroll for a year, then the employer gets an additional $1,000. Only workers who have been unemployed for at least 60 days are eligible for the credit.
There are two basic problems with the credit. First, there are more than 4 million workers hired every month already. A firm could get the credit for any hires among these 4 million who has been unemployed for 60 days, even if they would have hired the person anyhow. This is a lot of money for nothing.
The second problem is that the credit is far too small to provide any significant incentive to hiring. We know from a vast body of research on the minimum wage that employment is not responsive to moderate changes in the cost of the labor. This is why a a 15-20 percent increase in the minimum wage does not lead to any measurable impact on employment.
If a 15-20 percent rise in the cost of labor does not reduce employment, then no one can believe that a 6.2 percent decline in the cost of labor (only for the rest of 2010) would increase employment. In other words, there is little reason to believe that the Schumer-Hatch tax credit would create any noticeable number of jobs. It truly is money for nothing.
We can boost jobs with the right tax credits. Germany and the Netherlands have managed to keep their unemployment rate from rising in this downturn by promoting work-sharing. They give firms tax credits to keep workers employed at shorter hours rather than laying them off. In Germany and the Netherlands workers are experiencing this downturn as longer vacations and shorter workweeks.
We could do that here if we weren't determined to waste money. (Work-sharing is even good for the environment -- if we could ever get the environmentalists to think about the environment.) Anyhow, for now it looks we have to throw out money in the garbage with Schumer-Hatch. Where are the deficit hawks when we need them?
It's a close question - does the Congress have more contempt for the American people than the American people have for Congress?
February 12, 2010 5:56 PM | Reply | Permalink
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February 1, 2011 9:14 PM | Reply | Permalink
Assuming almost all quits have lined up jobs before they quit (reasonable assumption in this labor market?), then, employers are hiring around 2.4 million unemployed workers each month.
Assuming employers discriminated against newly unemployed and hired 60-day plussers, then, Schumer-Hatch would cost around $560 million a month or $5.6 billion through 2010 plus a bonus of $24 billion ($1000 x 24 million hired).
So -- a $30 billion gift to campaign funders without adding a single job. That's our boy Schumer; I won't deign to mention Hatch.
February 12, 2010 8:45 PM | Reply | Permalink
It's amazing, isn't it, how the Republicans slander and kill all programs that might be good for the Democrats, while the Democrats bend over backwards to help Republicans pass bills that will benefit the GOP. We all know that the Republicans will get the majority of the credit for this kind of pro-business tax credit, the majority of the votes from people who care about tax cuts, and the majority of campaign contributions from the business people who benefit from the policy. But the Democrats are always willing to give the Republicans a ticket to a feast, as long as they can stand outside the door and scavenge on the crumbs. I've never seen a political party so completely composed of spineless, groveling bootlickers. No wonder they keep Harry Reid as their leader.
February 13, 2010 7:49 AM | Reply | Permalink
It took me awhile to figure out that they aren't really spineless. They are totally corrupt.
February 13, 2010 11:47 AM | Reply | Permalink
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February 1, 2011 9:16 PM | Reply | Permalink
Money for nothing and your "Checks" for free
http://www.youtube.com/watch?v=V5ZEzWwKJnY&feature=related
February 12, 2010 11:41 PM | Reply | Permalink
Thanks for your patience and sorry for the inconvenience!
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December 17, 2010 5:28 AM | Reply | Permalink
RE: "Money for Nothing" - Dean Baker
MY COMMENT: Yes, but are the "chicks for free"?
"Now look at them yo-yo's, that's the way you do it...
...Let me tell you them guys ain't dumb
Maybe get a blister on your little finger
Baby get a blister on your thumb..." - Dire Straits
February 13, 2010 1:25 AM | Reply | Permalink
By the way --
Apparently, Schumer-Hatch was part of the Baucus-Grassley jobs bill out of which the majority leader has pulled a few items (Schumer-Hatch among them) and scheduled voting on this stripped down bill at the end of February (“We feel that the American people need a message,” Mr. Reid said. “The message that they need is that we’re doing something about jobs.”)
The Times agrees with Dean, so --
It must be a done deal!
February 15, 2010 9:46 PM | Reply | Permalink
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August 25, 2010 7:34 AM | Reply | Permalink
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August 25, 2010 7:35 AM | Reply | Permalink
People should not wait for the government to hand them jobs. You are responsible for your well being not the government. Many people believe this illusion and it's plain false. If you don't start making money now where will you end up over the years ? A 401k plan in my opinion is just something to keep you distracted. The money is somewhere else, go look for it.
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January 28, 2011 7:37 AM | Reply | Permalink
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February 1, 2011 9:13 PM | Reply | Permalink
People should not wait for the government to hand them jobs. You are responsible for your well being not the government. Many people believe this illusion and it's plain false. If you don't start making money now where will you end up over the years, especially with the current bad credit mortgage? A 401k plan in my opinion is just something to keep you distracted. The money is somewhere else, go look for it and try out a forex demo account
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February 2, 2011 6:08 PM | Reply | Permalink
It's all asinine; it's to be expected from economic illiterates that never so much as ran a lemonade stand and have spent their lives living off taxpayers. No employer in his right mind is going to hire an employee solely based on a tax credit of $3-5,000. The fact that this is what pases for emergency legislation to stem the downward economic spiral should leave us all mortified. I'm starting to understand why these morons work in DC, they're too stupid to work in the private sector.
We don't have to reinvent the wheel, we have to get rid of the democrats and institute economic policies that benefit working American citizens not the parasitic elitist scum in DC and their handmaidens. check out the florida mortgage rates
America, you have now seen liberalism on parade. Want more? Neither do I; smash the leftwing filth in Nov.
And creating govt jobs that become an added burden on the taxpayer is the absolute backward thing to do; we need private sector jobs that contribute via taxes not public sector jobs that are now paid for by taxpayers. You'd think we elected marxist bums. get a laptop carrying case
February 2, 2011 6:08 PM | Reply | Permalink
You would think that with so many simple minded people in Washington they could understand a simple concept.
When employers need more workers, they hire them. Giving them an artificial reason to hire people is not going to help the economy. purchase insurance today and be safe!
Putting more money in their pocket(by means of tax cuts) gives them the option of using it in the way that best helps their business. They may use the money for inventory, delivery truck, advertising or any other number of things. But they are in the position of knowing how best to use capital, not some bureaucrat in Washington.
Any money spent will help boost the economy, thus the hiring might not come from the business owner directly, but at the place the money is spent.
It would be like the DC folks telling Billings, Mt. how to handle a snow storm. check out the dallas mortgage rates for an example
February 2, 2011 6:10 PM | Reply | Permalink
I had to buy a new laptop case today and then i read this article... depsite the michigan mortgage rates i can still seem to afford what i need!!
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Republicans slander and kill all programs that might be good for the Democrats, while the Democrats bend over backwards to help Republicans pass bills that will benefit the GOP.
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