President Obama took advantage of the signing of the debt limit increase to “pivot” to jobs.
He proposed that Congress pass the following jobs program:
1) Extend unemployment insurance
2) Enact a payroll tax credit for employees
3) Overhaul patents
4) Approve free trade deals
5) Create an infrastructure funding bank
In his remarks, the President rebuked Congress: “It should not take the risk of economic catastrophe to get folks in this town to work together and do their jobs.”
The problem is that, other than approving free trade deals, the President’s job programs will not create any jobs.
Extending unemployment benefits subsidizes unemployment and keeps the unemployment rate high.
A temporary payroll tax credit does not alter firms’ hiring decisions because they know the credit cannot last long. (PS. Economists know that it does not matter who pays the tax – the employer or employee, but having the employee payment credit makes for better politics.)
The overhaul of patents may be a good idea, but its effect will not be felt for a very long period of time.
The approval of free trade deal will raise employment but this will not happen because of Democrat lobbying for too generous adjustment benefits for displaced workers.
The infrastructure bank would be a new Fannie Mae financial disaster set up to fund boondoggles for political cronies. It would establish yet another “independent” corporation with implicit guarantees of government bailout. Ten years down the road we must face the huge cost of bailing out Obama’s infrastructure bank.
In my view, this is not an employment program, Mr. President. Congress should ignore it. We'd be better off if the President pivots to something else where he can do little harm.