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Friday, January 29, 2010

A Proposal That Will Actually Create Jobs

From The Marston Chronicles

We have all watched in disbelief as the Obama administration has thrown over a trillion dollars at stimulating the economy and stemming the continual loss of jobs. Never has so much been spent to accomplish so little except to line the pockets of the special interests. You would think that even the economic illiterates could figure out that in order to create jobs, you need to give businesses a reason to start hiring. Threatening them with new taxes by letting the Bush tax cuts expire, cap and trade, and further regulation will definitely not do that; in fact, it will only encourage them to lay off more people.

There is a very simple way to encourage businesses to start hiring people right away. It does not require a whole new bureaucracy to administer it or to send money to anyone. All it requires is to design a simple form that businesses can fill out with the name, address, social security numbers and wages of all new hires or rehires. What will encourage businesses to do that? It is because the federal government will subsidize a portion of the wages of these hires and not be sending the business a check either. Businesses know that the inefficient federal government will not get them a check in a timely fashion as the cash for clunkers program made very clear.

What kind of a subsidy would be required? The business agrees to keep the new hire employed for a full year and to replace any new hire that leaves for any reason for the balance of the one year contract. The government will agree to pay 100% of the gross wages of the new hire for the first month. The second month, it will pay 90% of the gross wages. Each month after that it will decrease the subsidy by 10% until the subsidy stops after the tenth month. Simple isn't it? This is not rocket science, people, it is just common sense which seems to be sorely lacking in government these days.

How does the business get paid the subsidy? It doesn't. It subtracts the amount of the subsidy from the payroll taxes the business deducts from all its employees' wages and sends in the reduced amount. The form is attached to the paperwork filed showing the payroll taxes that are being paid. The business gets to keep the the subsidy immediately by not sending in all of the payroll taxes like it is required to do. There is no muss, no fuss and minimal paperwork. Instead of having to cut a check for the subsidy with all of the effort and bureaucracy required, the government just collects less in taxes in the first place. Now would businesses go for this program? You had better believe they would.

You now are going to tell me that this is way too expensive. Like a trillion dollars wasted to no real effect was too expensive? Instead of another stimulus bill that will not work, how about this idea? You can just use the rest of the previous stimulus money to pay for this program since it will only be wasted on any other approach. How many jobs will be created the minute a bill enacting this program passes? As many as the government is willing to subsidize. Let's say that the average wage of a new hire will be $10 an hour. For an average work month of 176 hours, that is $1,760 the first month, $1,584 the second, etc. until it becomes $176 in the tenth month. This is a total subsidy of $9,680 per new hire (or rehire). Let's call it an even $10,000 to keep the math simple. You create 100 jobs for each million spent. That comes to 100,000 jobs for each billion spent. If this program had been in place in stead of the stimulus bill, we could have created 10,000,000 jobs at a cost of $100 billion.

Since we spent a trillion to no avail, we could have gotten by with a tenth of that and have a solid economy to boot. There would have been no need for bailouts that did nothing for working Americans. It would have saved a fortune in unemployment compensation and food stamps. Starting in the eleventh month, the government would start collecting payroll taxes on another 10 million employees and not be in the bind it is now. Best of all, these jobs would put us back at full employment in a very short time. The state and local governments would be collecting sales taxes on all the money being spent by another 10 million employed people and not be in the bind they are in now. This is not a welfare program, it is an investment in America's future. Why does the government have to do things the hard and ineffective way?

Does this simple idea ring a bell with you? Fine. Spread the word through the internet and flood the halls of Congress with demands that the government enact this program. This is not a Republican program or a Democrat program. This can be the American people's program. The sooner this is done, the sooner we will all be better off and so will our country.