Obama and stimulus dollars (tax incentives for jobs)

1. Obama wants to create tax incentives geared to boost job creation. 5000 dollars for each new worker hired, for example. Or reimbursed social security for an increase in hours. But geared toward smaller businesses, since you can’t make more than 500 000 dollars in all.

The program would cost about 33 million total. Obama wants to fund it with money paid back to the government by the banks that were bailed out.

It will be difficult to administer though because there will be small business trying to game the system, by for example firing a bunch of employees than hiring them back. The bill has thus been retooled to try to hedge these issues.

2. Robert Reich (former labor secretary and very esteemed economist and professor at Berkeley) agrees that this would be a good first step, but insists that the government must do more, a lot more, in order to get things moving in the right direction:

Many Americans borrowed too much during the boom years before the Great Depression, and now they’re paying the price. So they naturally analogize their own plight to that of the federal government and the economy as a whole. The government is too deep in debt, they reason. Logically, that means the only way out of the nation’s economic doldrums is for the government to mend its ways. The government has to reduce its budget deficit just like American families have to reduce theirs.

This analogy is faulty, of course. If John Maynard Keyenes taught us anything, it’s that a federal budget is not at all like a family budget. In fact, it’s precisely because families have to pull in their belts that the federal government has to let its belt out. When consumers and businesses aren’t buying much of anything, the government has to fill the gap. That’s the only way to get jobs and get the economy moving again. Once the economy is percolating, the government can pull back. By then, tax revenues will soar, and the long-term deficit will shrink. (…But here again, it’s vitally important to separate the long term from the now.)


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2 Responses to Obama and stimulus dollars (tax incentives for jobs)

  1. Andrea says:

    So… something I wonder about when reading of “stimulating the economy” is just how sustainable our idea of a “robust economy” really is. I mean, the economy does well when people are buying a TON of stuff, when consumption is up, of both goods and services. This provides jobs creating those goods and providing those services. But it seems to me that as a society, Americans have more or less reached the pinnacle of consumption. I mean, how many more Chinese-made cheap gadgets, layers of packaging on super-processed food, or cosmetic surgeries do we want in our country?

    Is there a way to have a strong economy with simple local production, re-using or repairing goods and reducing waste, and dividing the available labor hours among people so that no one is unemployed and everyone has a shorter work-week? I have very limited knowledge of economics and may be rightly accused of being some kind of leftist-utopist, but I wonder if it is the most desirable thing to stimulate Demand to stimulate production of Supply and thereby escalate ourselves into a wasteful, workaholic consumption machine?

  2. Andrea says:

    I do want to note that I make a distinction between the short and long term, that in the next decade high unemployment is looming large and I would almost certainly support actions to mitigate that situation, and that any radical re-conceptualization of “a strong economy” would be a very long-term change… it’s something I’m quite interested in speculating on, though.

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