Home > Economics > Here’s a Wad of Money with No Strings. I Expect You to Create Jobs, but Whatever.

Here’s a Wad of Money with No Strings. I Expect You to Create Jobs, but Whatever.

April 25th, 2011

The current argument by right-wingers is that we need to give more and more tax breaks to wealthy people and corporations because they will take that money and create new jobs. This has long been the argument for sweeping tax cuts for the upper class, but I have never understood why people give this claim any credence, beyond the simple reason that they don’t apply any thought to it whatsoever.

I mean, think about it–we’re talking about essentially giving rich people loads of money with no strings attached. They don’t have to create jobs. All there is is the theory that some of the money could be put toward job creation, if the wealthy people in question felt so inclined. Doesn’t seem like a really wise plan. This reminds me of the deal made with telecom carriers, allowing them to hike prices in the hopes that they would apply this money to creating high-speed Internet nationwide–but the deal did not require them to do it. Guess what? They took the money, and didn’t use it to create high-speed connections. Not to sound flippant, but that is exactly what I would expect, given the conditions of the deal.

Only an idiot would give someone else money unconditionally and expect that person would spend it exactly as the giver desired. Only a fool would be in the perfect position to set conditions and yet set none.

Instead, if tax cuts to create jobs is what you’re after, making it conditional is a no-brainer. Frankly, it sounds stupid to even have to suggest this, but here we are. The cuts would have to be carefully crafted so they could not be taken advantage of. For example, a simple “create jobs and get tax breaks” law could spur many businesses to fire loads of people before the break comes into effect, so they could hire people back to get the breaks. Or, businesses would hire people at the lowest possible salary for the shortest amount of time–so that would have to be factored in, etc. etc.

How about this: create a tax credit for any business that can show a net increase in hiring and payrolls in non-administrative positions over a span of, say, three years, with perhaps conditions where the benefits increase as the new jobs continue over the years. Reward hiring, punish firing and off-shoring. The amount of the tax break would depend upon the amount paid and the benefits included. You might even give greater benefits for certain jobs–for example, manufacturing jobs with good benefits. That way, the tax cuts go only to businesses that actually hire new people for good or better positions with much better salaries and benefits.

Of course, this is not what Republicans want, because creating jobs is not the actual reason for the tax cuts–it is, instead, only the excuse. And a rather lame one at that. Republicans might grudgingly agree to a job-generating plan if it were all they could get, but it is certainly not what they would propose or prefer to settle for.

Obama and/or the Democrats should probably set this as the compromise target, which means they should ask for something far more–like the Republicans calling for the end of Medicare, for example. Dems should say, raise the taxes on people making more than $250,000 to 40%, on millionaires to 45%, and billionaires to 50%, and close all the loopholes–something like that, which they know will never get through. Then settle for Clinton-era tax levels (or, hopefully, a bit better) with targeted breaks for job creation.

Not that that will happen. Dems will likely continue to ask for no more than the Clinton-era levels, and then either completely cave and extend the Bush tax cuts again, or settle for something very close to what the GOP wants.

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  1. April 26th, 2011 at 09:07 | #1

    Instead for money to go to wealthy, it better go to the masses. They will spend it immediately, which will fuel existing businesses making the economy stronger and the purchases will return to budget with taxes.

  2. Troy
    April 26th, 2011 at 10:35 | #2

    ^ dunno, really. We don’t have a spending problem, we have a wealth-creation — ie job — problem.

    Like Japan in the 1980s, we bid up the cost of housing waay too high last decade, and we’re still living with the consequences.

    More money would help some things, but isn’t the solution we need, since more money alone can also make things worse.

    Here’s a graph of the situation:


    blue line is outstanding home mortgage debt
    red line is asset value of homes

    Red line has dropped $6T and may fall some more.

    Blue line has dropped $500B and if things don’t turn around will continue falling.

    This is bad because falling mortgage debt largely comes from defaults, and the system really can’t handle another $1T of defaults being thrown at it.

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