I Know It Is A Bad Idea But I Voted For It Anyway

Two days ago the U.S. House Of Representatives approved legislation which allocated $35 billion towards so-called job creation. The bill they passed would give hiring companies a temporary payroll tax break in addition to providing funding for construction in the transportation area. Since the country has lost over 8 million jobs since the recession began in late 2007, the political class thought it would be a good idea to create jobs. never mind the fact that government cannot create jobs, they can only temporarily create work.

The main thrust of the bill is a twofold hiring focus. First, it would allow businesses, who hire the unemployed, to not pay Social Security taxes on those new hires through the end of the year. Second, it would grant those businesses a $1,000 credit per worker if those new workers stay on the job for a full year.

What did some of the Congress people think of their new bill? Here a few examples of quotes from the march 4, 2010 Associated Press article describing the legislation:

• "If that's the only thing that I can vote on... I'll vote for it, obviously." Congressman Bill Pascrell
• "It's really not a jobs bill." Congresswoman Barbara Lee
• "Better late than never, and better something than nothing." - Congressman David Obey
• "It simply encourages conduct that would occur anyway." Congressman Lloyd Doggett
• "It's an insipid piece of legislation." Congressman Jim McDermott
• "It's not that good, but it's better than nothing." Congressman Jim McGovern

That sad part about these quotes is that they all come from Democrats, most of whom voted to pass the legislation regardless of how bad and insipid it is. I can imagine what the Republicans think of the bill, almost all of which voted against it. There are so many problems with this bill:

• For all those businesses that were going to hire people anyway, they get free grants of money since it is impossible to determine which of these hires would have happened in the absence of the this bill. Much like the Cash For Clunkers program, inane laws like this just move demand around and rewards the recipients of the cash for doing something they likely would have done anyway. It does not spur growth and is just a free handout of taxpayer money in most cases. That was Congressman Doggett's point listed above.
• Although it is a lame attempt to spur jobs growth, it robs the Social Security Administration of some potential revenue that the article says will be be made whole. How do you do that? Why, at some point in time you get it from those that generate wealth and the resultant taxes, the American taxpayer. Thus, all this bill does is take money out of the Social Security trust fund, spend it in a lame attempt to spur job growth and then takes the same amount of money from taxpayers to repay Social Security.
• You can bet that there will be rampant fraud under this program. How easy would it be for a small business to cook their books and make it look like they are bringing people (sisters, brothers, cousins, friends, etc.) on board when they are just paper hires? How easy will it be to fire everyone on Friday and hire them back on Monday and make it look like you hired a bunch of people when all you did was reset the clock to collect the Social Security dollars exempted under this bill and get the $1,000 grant per employee?
• As Republican Congressman LaTourette said in the article, most business people he has talked to will not use the provisions of the bill because there is simply not enough business available to justify any hiring, regardless of the provisions of this legislation. "This is not going to create one job."
• And finally, how many jobs can something like this generate (remembering that these types of programs create work, not new economy jobs)? Some of our previous posts to this blog calculated that best, best, most optimistic case is that the previous government stimulus funds cost about $224,000 per "job" created. If you assume that this bill will not be anymore efficient than previous ones and we divide the $35 billion by $224,000 cost per job, you end up, best, best case with just over 100,000 jobs created. Most of these jobs disappear once the money is spent since they were not permanently created, they were temporarily funded with borrowed taxpayer money. Anyway, creating 100,000 temporary jobs pales in comparison to the over 8 million jobs lost in the past year or so to the recession.

S0 let's review. Most politician do not like the bill and do not think it will work but many voted for it anyway. Although it is unlikely to work, any temporary "jobs" it creates will likely be very expensive, and it well be subject to an incredibly high probability of fraud that will be next to impossible to detect. Most justified voting for it simply because it was better than nothing, kind of like being queen of the pigs, you may be a queen but you are still ugly. And in this case, an extremely expensive, ugly pig at $35 billion. Better uses of the money:

1. Pay down part (a very small part) of the deficit and national debt to get government spending under control and get the country fiscally sound again.
2. Give each U.S. household a check for $270 or so, it is their money anyway, they should be able to waste it anyway they want and not rely on the political class to pass "insipid" legislation to waste it.
3. Retrofit about 580,000 U.S. homes so that they are completely solar powered, reducing green house gases, reducing dependency on foreign energy sources, and possibly creating some real jobs in a new industry. See a previous post concerning nuclear energy on how we arrived at the 580,000 homes ($35 billion divided by the average cost of retrofitting a typical house = $61,000).

If I can come with these three far better ways to spend $35 billion, I am sure smarter people than me could come up with even better ideas. Unfortunately, those smarter people apparently do not currently sit in the U.S. of Representatives.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.