I had a large problem with the Jobs speech that Obama gave last night and it wasn't that Obama was practically yelling at Congress. Actually he did yell at one point but anyway. The problem I had was with the proposed changes to the payroll tax and other tax deductions aimed at small business.
The first problem is that even though these new proposals are touted as being "paid for", I don't think people understand that it is merely either a shift in revenue from small business to others or that some other constituency (apparently medicaid recipients) will have something taken from them.
The second problem is that why exactly is it necessary to give small business (or any profitable business for that matter) such a gift? Generally speaking businesses hire people when they anticipate high demand for their product or services that cannot be met by its current workforce. Demand for goods and services is dependent upon customers wanting and being able to partake in those goods and services. Why would a business hire people for non-existent customers? In other words, I don't see the point for giving a business a tax cut to hire somebody that they don't need because if that business needed that employee that business would have hired anyway. In other words, businesses don't need a government incentive to hire. Businesses already have a profit motive to hire.
I could see if the government was going to purchase goods and services from a company and due to that demand they went out and hired people. That would make sense. But to simply say we'll tax you less to hire people you don't need, doesn't make a lot of sense to me.
The third issue is that of the payroll tax or whatever it was that is allegedly taken from the employees cheque. Again while I understand the political motive to putting more money in the hands of the individual I don't see this making a big difference. Remember that this was done before. People who are in dire straights are not going to suddenly go splurge on luxury goods because their cheque has another $25 bucks in it. They are going to go and pay down debt. Those of us who are not in debt are the types who already have a saving habit and you can bet that most of us are going to put that money away as we see the increasing attacks on Social Security threaten our retirement.
I don't think the general population is going to really get back to spending, which isn't necessarily the best thing, until they are out from under the bad debt put on them by the bankers. The fallout from the mortgage scheme needs to be addressed. By addressing the way over sized mortgages a lot of families will have money freed up and would probably get the housing market as well as people like me who simply will not overpay for property go into the market and the spending that requires hits small businesses who will then have a reason to go hire people without government gimmicks.
(17 years of informed commentary)