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Will a payroll tax cut mean more jobs?
A jobs sign in lures workers in Louisiana
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Kai Ryssdal: President Obama being the president and all, he probably got an early peek at this morning's unemployment numbers. So he was ready. He said this morning, in some remarks in the Rose Garden, he's going to have a new jobs plan ready for everybody next week.
Our Washington bureau chief John Dimsdale has more on what's being talked about and whether it might do any good.
John Dimsdale: One idea the White House is reportedly considering is a temporary elimination of the payroll tax on employers.
Economist Tim Quinlan with Wells Fargo says, that'll help, because companies are flush with cashm and a payroll tax cut will encourage them to hire workers.
Tim Quinlan: But until now, businesses have not taken that step to add to payrolls, because there's a lot of uncertainty about what the costs of adding additional employee are going to be. So I think the president providing a little bit of clarification here can only be seen as a positive thing by markets.
But tax breaks risk increasing the deficit, which is why Robert Bixby of the Concord Coalition says they need to be temporary.
Robert Bixby: The problem is, once you lower a tax like that, it becomes very difficult to raise it again. And so, if you keep lowering taxes, the expectation is they're going to stay there, you might have a very serious deficit effect over time.
But will temporary stimulus do the trick? Stephen Moore, editorial writer for the Wall Street Journal, likens a short-term tax cut to the home buyers tax credit or Cash for Clunkers.
Stephen Moore: The problem we run into with all these temporary assistance programs is when the aid runs out or when tax cut runs out, the people lose their jobs again.
White House advisers are also considering permanently extending a tax credit for money invested in research and development, although some economists say that will take a long time to have an impact.
In Washington, I'm John Dimsdale for Marketplace.
I agree with Pettengill. Tax cuts never lead to lower unemployment. Heres my idea: Why not draft unemployed/underemployed workers to do some of the work that needs to be done, but that isn't being done? We could staff public libraries, staff public/state parks, operate food banks and more. Here's the reality: Republican tax cut policies caused the recession and caused the deficit. Doing more of the same will just make the problem even worse.
When has a tax cut ever resulted in lower unemployment? In 2001, Bush signed his first tax cut when unemployment was 4.5%, and 10 months later his second when it was 5.7%, and his third 14 months later when it was 6.1% and unemployment kept rising until the spending for the Iraq war began to kick in; mid-2003, the US started spending huge amounts reputedly to rebuild Iraq, even creating a shortage of building supplies in the US as so much was shipped to Iraq. In 2008, Bush signed two tax cut bills, one to create jobs when unemployment was 4.8%, then as part of TARP, when unemployment was 6.6%, and Obama signed a big tax as soon as he took office when unemployment was 8.2%. Right now, your taxes are cut by the 2001 tax cuts, plus cut by the full cuts of the 2003 tax cuts, plus the tax cuts on top of those from the 2009 Obama tax cuts. In 1993, Clinton signed a big tax cut, and then spent the next 6 years fighting Republicans who wanted to cut taxes with vetoes, and unemployment fell to the lowest rate since the 60s. Why does anyone think tax cuts won't kill jobs just like all the other tax cuts have killed or stalled job creation?
More than the mere *cost* of hiring and employing workers, which is not insignificant, the big barrier to hiring is *uncertainty* whether those costs will go up in future. This administration has shown pretty clearly---for instance in its insistent support of the new health-care law, cap and trade, and card-check---that it's willing to increase the cost of employing a worker if it advances the Left's agenda.
