White Collar Reset: Why aren't we talking about tax credits for new jobs?
Oh sure, every month when the U.S. Bureau of Labor Statistics issues the latest update of its grim count (as it will tomorrow), my fellow jobless and I rise to the top of the news cycle for 24 hours or so, but then pretty quickly it's back to the screaming over health care, happy buyers cashing in their incentives on new cars and first homes and the latest fashion faux paw of Bo the Obama family puppy.
If you're one of the 14.5 million (actually 22.3 million if you count all those forced to work part-time or who have become so discouraged they've pulled themselves out of the workforce), this can make for a disquieting sensation. The closest thing I can compare it to are the restless undead in everyone's favorite M. Night Shamalyan movie The Sixth Sense. Here you are walking around feeling as if an ax is sticking out of your back, half your skull has been blown off, maggots are crawling out of your eye sockets, but the moment you try to engage others in just some simple civilized conversation about what might be done in Washington to bring down the 9.4 (or 16.5 if you count it the honest way) percent unemployment rate, it's like they look right through you.
And I'd almost understand if taking on the problem were really as futile as everyone has been led to believe, but it's not. There is at least one thing that can be done. In fact, the government did once it before: issue a tax credit that encourages businesses to hire new workers.
From 1977 to 1978 to fight the lingering high unemployment from the 1970s recession, the Carter administration instituted what was known as the New Jobs Tax Credit. For each new worker added to their payrolls, employers received a tax credit in an amount equal to $7,000 in 2009 dollars. At its peak, 1.1 million businesses received subsidies for adding more than 2.1 million workers at an annual cost of $4 billion, or around $13 billion in today's dollars.
Why more people aren't talking about reviving this program is beyond me. I can't tell you how many times in recent months I've found myself in an interview across from a decision-maker intrigued by my abilities who conceded that now would be the time to create or upgrade the position to bring me on ... but just couldn't quite justify the risk of the added expense. Would a $7,000 tax credit have made the difference? Maybe not in every case, but based on my informal exit polling, enough that I've become fairly obsessed Googling and calling around trying to find a national politician or pundit who might take up the cause.
I finally did find one, a Haley Joel Osment for we zombie hordes. His name is Timothy Bartik, and he's an economist with the Upjohn Institute, in Kalamazoo, Michigan, one of the country's leading centers for employment research. Bartik, who in July published a paper titled "The New Jobs Tax Credit: A Tested Way to Fight High Unemployment," is part of a small but distinguished group of economists (Noble Laureate Edmund Phelps is another) who have been arguing for just such an approach ever since the job market headed into the abyss last October.
The irony is, for a brief time last winter, they also had the president in their corner. Most people probably don't remember now, but Barack Obama advocated for a new jobs tax credit on the campaign trail, and then included a modest -- $3,000 -- version of it in the early draft of the Stimulus Package. "But there was literally zero support for it on Capitol Hill," Bartik explained. "At the time everyone was focused on saving the economy, not jobs. The Democrats were only interested in spending, and the Republicans just wanted tax cuts with no strings attached. So early on, the administration just dropped the whole idea."
Interestingly, it was around that time Bartik became entangled in a vigorous polemical battle over the arcane proposal on TaxVox.com. "Some of my colleagues argued that such an incentive causes people to hire people they would've hired anyway. And it's true -- on top of the 1.3 million new jobs we estimate would be created by the subsidy another 2.3 million will likely be added that would've been added anyway. That's the way it is for any incentive program, and why when we talk about the real cost of the program it's probably more like $20,000 per worker. But that's compared to $92,000 for the cost of every job created by the stimulus pan. Plus, I'd argue that there are also social costs to unemployment." You don't say? "So when everything is figured in, I'd contend $20,000 per job created is really pretty cheap."
But, according to Bartik, perhaps the strongest argument for a revival of the New Job Tax Credit is not what it can do for the unemployed, it's what not addressing our plight head-on could do to everyone else.
"The unemployed not only affect when the unemployed buy, they also affect the buying patterns of employed people. When people with jobs see a lot of other people still out of work, they start worrying again about the future of the economy and start to scale back on their own spending. And that could lead us into a double-dip or W-shaped recovery."
So just to be sure I have this right: The principle reason Washington needs to re-institute something like the NJTC is that if it doesn't the prospect of 14 or 22 million of us eating through our unemployment benefits, having our houses foreclosed upon, going on food stamps and welfare, moving in with family members or under a bridge could bum out the rest of the country to such a degree it could end up right back another recession ... ? Bartik laughed. "Yup, that's pretty much it in a nutshell."
And that's why Bartik (bless his cold, analytical economist's heart) is arguing for a re-opening of the New Jobs Tax Credit discussion. Now.
"If Congress starts talking about it now, by the time they get something passed and the program set up, that'll take us to early mid 2010. If, on the other hand, we wait until March for everyone to agree 'Yeah, it looks like we have another jobless recovery, maybe we should do something,' then you're in an election year when things always take longer. And then you're talking about a program that might start to have an impact in very late 2010, more likely 2011."
Or America could just forget the whole thing and find a really big ice floe for all of the unemployed to live on and give it a good, hard shove. ... Oh wait, right, there are no big ice floes anymore.