Talk about a stunning one-two punch for Democrats. First they lose the governorships of deep-blue New Jersey and newly-blue Virginia. Now the Labor Department reports that the national unemployment rate surged to 10.2 percent in October. (The broader U-6 measure jumped to a stunning 17.5 percent.)
Congressional Democrats now face a 2010 midterm election where the jobless rate might still be in double digits, putting America’s incumbent party at risk for huge electoral losses. And Barack Obama faces a declining approval rating that would both hurt his allies on Capitol Hill and further slow his ambitious legislative agenda.
So you would think that job creation would be Job One right now in Washington. But that doesn’t seem to be the case.
For instance, the House of Representatives is nearing a vote on healthcare reform that includes a 5.4 percentage point surtax on so-called wealthier Americans. But that group also includes many small business owners. So, in effect, the bill would impose a $13 billion-a-year tax on a sector crucial for job creation.
What else has Congress been up to? Well, it just passed an extension of unemployment benefit, a move that won’t, of course, create any jobs. It also voted to extend and expand the fraud-riddled home-buyers tax credit, even though 85 percent of the 2 million people expected to claim the credit would have bought a house anyway, according to Brookings.
Probably the best idea floating around Democratic policy circles is a job creation tax credit. A study by the Economic Policy Institute claims that a $28 billion, 15 percent refundable credit would create 2.8 million jobs in 2010.
Robert Pozen, chairman of MFS Investment Management, also likes the tax credit idea, though he thinks at least half of any workers hired should be ones currently receiving unemployment.
This wouldn’t be a long-term solution to what looks like a long-term labor market problem. It would also open up Dems to more GOP charges that the $787 stimulus plan is a bust. And liberals would push for even more spending.
But it’s about the only affordable idea that might keep the one-two punch of 2009 from becoming a knockout in 2010.
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[...] View original here: Reuters Columns » Blog Archive » Will tax credit do the job for … [...]
- Posted by Reuters Columns » Blog Archive » Will tax credit do the job for … | Money Blog : 10 Dollars : Money Articles.Saying the 5.4% tax on couples earning over $1 million a year would somehow prevent small businesses from creating jobs is utter nonsense. Most small businesses are pass-through entities. For the tax to apply, the owners would need to take $1 million out of the business. To avoid the tax, owners simply need to grow their business and hire more workers. If anything, the tax promotes job growth because it incentivizes hiring over profit taking.
- Posted by Kirk