Let’s start with a basic premise: anyone who tries to get what is happening in the economy by looking for "green shoots" or the "recovery" does not understand what is happening to real people. Almost one out of 5 Americans–ONE OUT OF FIVE–do not have decent, meaningful work. Forget the media reports about unemployment–as I’ve pointed out, most of those reports do not take into account people who are working part-time because they can’t find full-time work and people who have given up looking, not to mention people working for the poverty-level minimum wage (a scandal in its own right).
Add on to this phenomena, which we don’t know it will play out: in the good old days, consumer spending accounted for 70 percent of economic activity. I don’t want to argue here whether that is good or bad. But, a question now looming is whether people will save a lot more given the shock of the last year, the end of easy credit and the crash of the housing market–which would mean further crimping of what we used to think of as a driver in the economy.
My point about setting this out is the current debate about what else to do today to get people working. One proposal being floated is a tax credit:
One version of the approach, to be unveiled next week by the Economic Policy Institute a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.
I don’t know enough about the details of this but I generally take a dim view of something that could end up being corporate welfare in sheep’s clothing. I am a bit skeptical about how you extend a tax credit like the one suggested and actually (a) make sure it is used properly and (b) ensures that it ends up creating stable, long-term jobs, as opposed to giving a short-term write-off to the bottom line.
It feels like the proposal is being done for political reasons because people have been bullied–surprise!!!–into a defensive position about government stimulus. Fact: it has worked. As my friend Dean Baker says:
Go ask your governor or mayor how many more people they would be laying off right now had it not been for the federal aid provided by the stimulus. Also, millions of unemployed workers are seeing bigger unemployment insurance benefits (including health care coverage) because of the stimulus. Extended and increased benefits not only help these workers, but when they spend this money it helps boost the economy. The same is true of the tax cuts directed toward ordinary workers that were included in the stimulus package.
The stimulus package has likely kept the economy from losing 1 million more jobs by this point. If the prospect of 10 percent unemployment sounds bad, let’s start talking about 11-12 percent unemployment. That is where we would be going if Congress did not pass the stimulus package.
I’m not ruling the tax credit out. But, I’d say we need to think about another massive stimulus, aiming to send money to states and localities. The fiscal deficit should not be an issue when posed versus this reality: states are crumbling under the weight of the financial collapse and a 30-year long process of the desctruction of a progressive tax system. More important, I think the greater threat to our society is the long-term damage that will be done to an entire generation of workers who live through a period of poor job options.
