Wednesday, September 14, 2011

More on the jobs bill

My post on simple jobs bill arithmetic generated all time highs in visits and comments for this blog (thanks to Greg Mankiw for the link).  The post, which suggested that we take the proposed $447b jobs package and spend it directly on job creation for unemployed workers, was meant to be tongue in cheek.  There definitely would be problems identifying who the eligible workers would be.  Lots of people who are not currently searching for work would all of a sudden be interested if there were a "free" job for them.  Also, my suggestion of a flat check of $32k to all does not consider a wage structure where some people work full-time at minimum wage and make roughly $15k whereas others earn considerably more than $32k.

Since President Obama is currently giving a speech touting his jobs bill on NC State's campus today, here are a few more thoughts about his proposal:
(1) The President's proposed stimulus is poorly targeted in terms of its economic impact.  Most of the temporary tax cut will be saved by a household sector that is still trying to work down debt.  That is why so much has to be spent on the tax cut to generate a single job.
(2) The President's plan is smartly targeted in terms of political impact.  Everyone paying FICA taxes gets a break; the rich (or at least those who are employed) do not get as big a break as they would from a similar across the board cut in the income tax. 
(3) The plan does precious little to invest in the human capital of the long term unemployed (a subject of this previous post).  Vouchers for education or training programs that are targeted at job losers should have been a bigger part of the package.  People who have been out of work for a year or more need more help than a UI check.