Back to Work - Bill Clinton [54]
6. Pass President Obama’s payroll tax cuts. In the American Jobs Act, the president has proposed a 50 percent cut in payroll taxes for 160 million workers, a tax cut worth about $1,500 to the typical family, and a 50 percent cut in employer payroll taxes on the first $5 million in payroll. If enacted by Congress, it will have a positive impact on employees who’ll have more spending money and employers who believe that, with more employees, they can increase sales of their products or services. All the independent studies show that the positive impact of payroll tax cuts is considerably greater than that of keeping the Bush-era tax cuts for high-income individuals.
The president has also proposed a complete payroll tax holiday for all net new jobs and increased wages, up to $50 million in payroll increases. We don’t collect payroll taxes on nonexistent jobs anyway. This would help employers of all sizes as well as their employees. There are ways to prevent abuse and to require that the tax be paid if, for example, already-employed workers are counted as new ones, so that employers will get the benefit only if they add jobs.
In addition to the large tax cuts, the president has proposed a $4,000 tax credit for employers who hire people who’ve been out of work for more than six months, rising to $5,600 for unemployed veterans and $9,600 for disabled veterans.
AS WE SQUEEZE DEBT out of the economy, bring corporate money back into it, and provide payroll tax relief, there are some other things government can do that could make a big difference.
Before I get into the specifics of what and why, we should look at the nature of our jobs challenge.
Even in good times, every country needs an economic strategy designed to speed the development of business and job growth in the most promising areas. That is especially true in nations with more open trading systems, where the competition is stiff and nothing can be taken for granted. Remember what happened to job growth in the first decade of the twenty-first century before the crash in September 2008. It was virtually nonexistent, because all our growth was concentrated in housing, consumer spending, and finance. The first two were limited by the capacity of average Americans to take on more debt, especially when they weren’t getting pay raises.
The financial sector, facing limited opportunities to make money the old-fashioned way, by providing issues of new equity or debt to help companies grow and hire, resorted to ever more esoteric devices to transfer mortgage risks away from those who had taken them, to hedge against possible losses, or just to gamble on whether mortgages or other assets were going to go up or down in value. There was an enormous amount of money moving around, but it didn’t create employment and, in the end, wound up costing millions of jobs. The people who made a percentage on each deal did well, but because of the nature of the investments there was no trickle down. The net effect was to increase inequality, weaken once profitable businesses, and reduce employment.
We need a strategy that will create jobs and expand businesses, one that includes profitable opportunities for the financial sector to invest in broad-based growth. All of us have a big stake in putting America back to work. For one thing, we can’t solve the debt problem without more growth. Without growth, tax increases won’t produce the necessary revenues, and spending cuts will be outpaced by spending increases related to unemployment and poverty. It will take strong growth, spending cuts, and revenue increases to make a real dent in the annual deficit and our long-term debt problem.
In August 2011, I was at home, channel-surfing, when I saw the Dallas Mavericks