A real solution that can buy us the time we need...

Discussion in 'Economics' started by Mvic, Feb 8, 2009.

  1. Mvic


    I have read that according to the CBO each job created under stimulus will cost between $100-300K. These jobs will likely pay no more than $40k a year. Does this make any sense to anyone? Certainly makes those who are scratching their heads wondering if this stimulus is really about jobs or pork spending seem like the rational ones.

    If you take the President at his word and accept that the stimulus is about jobs then why not a programs that gives companies a credit for each job created. For example, if you create a job that pays $40K you get a $20K grant from the stimulus. Even if you gave businesses a 66% reimbursement for each job created you would still create many multiples of the jobs than the current $100K price tag per job. You would also leverage private money and leave the business decisions up to corporations.

    The additional bonus is that with all these workers back on the rolls (and it wouldn't take years, corporations would go on an immediate hiring binge with these matching funds as their marginal productivity would soar given how cheap each additional worker is boosting profits thus helping balance sheets credit ratings and stock prices) states would not be strapped for unemployment insurance money which would also not have the knock on effect of having them strapped for Medicaid money etc.

    Housing would also start to turn around or at least put in a bottom with millions back at work in short order the rug that unemployment is to housing would not be pulled and defaults would decrease and people would be able to afford to stay in their homes. The waterfall effect that foreclosures are having on housing prices would be stemmed and housing could start to recover.

    Commercial real estate would not be the next shoe to drop because all these new employees would need some space to work in keeping buildings full.

    The cost of all this would end up being substantially less in fiscal etrsm because all these people w0oudl be paying taxes, substantially reducing the net cost of the stimulus. This is important because it is all borrowed money, the less we have to borrow the better off we are and the lower our interest rates will be. The benefit to the nations confidence would be invaluable and people would not feel that they needed to get in to hunker down depression mode which is just adding to the crisis with all sorts of reatil going under.

    I was speaking to a friend of mine who runs a couple of small businesses and asked him what would he do if he could get 50-66% matching funds by hiring new employees? He told me that he would hire 20 people within a month, that would be a 25% expansion of his work force!

    $100-300K for a $30-40K job eventually or $20-30K for a $40K job in the next month or two. You do the math!

    My suggestion would be to have an immediate jobs stimulus as outlined above where each new $40K job would be incentivized by a $26.5K federal grant. 4M jobs would cost $106Billion!

    Again, that is $106B for 4 MILLION $40K JOBS! Let’s go crazy and spend $212B and get 8Million jobs, that would put most states back in to surplus not to mention the growth in GDP that would produce.

    Then when people have had time to think and debate we can pass a spending bill when we are not all having a “millions more unemployed” gun held to our heads, but my guess is that it wouldn’t be needed. And our children and grandchildren would thank us, as it is they who will be pay this borrowed money back.
  2. ask american business how many more people they would hire if the health care burden were taken off their backs. at the same time it would make the us manufacturers more competetive with other nations that have national health care.
    since obama has promised to give health care to all you fulfill two of his promises at the same time.
  3. Mvic


    Couldn't agree with you more on that. Tort reform would also be a tax free stimulus.
  4. Health care is deductible for business, so the effect is much less.
    Co-pays are beginning to hurt employees.

    You can't buy your way into higher employment and greater demand does not necessarly cause more employment unless that demand is real and not goverment induced.

    We need to reduced the cost of creating and operating new businesses. It also helps to break the consolidation wealth.
  5. 20k credit for new hires.
  6. Mvic


    A temp elimination of the corporate parol tax for small businesses woudl be a start and also helpful. As fars as not being able to buy higher employment you are right over time but when so many have just been laid off, with thier workload having been distributed to fellow workers who are still employed, a temporary hiring boost would only be positive. A few hundred billion would stave off the deflationary spiral long enough for some real thinking to be done on longer term infrastrucure, biotech, and green energy projecst to take up some of the slack.
  7. Mvic


    That would work too, though I like to tie it to a % as it incentivises better paying positions. A across the board $20K credit could incentivise a lot of very low paying hires that would stimulate the economy no doubt but would it allow people to afford to stay in their homes and keep paying their bills and have some discretionary income to spend, that is all part of the equation.
  8. kxvid


    To answer you question, the only people that makes sense to are economists.
  9. it would be better just to send the 20K to the individual.

    If a company needs to hire someone they will. Companies are not designed to carry extra employees. Would these subsidized actually be part of production? This would only build inventories.

    Better to give the company 20K to update equipment so it can raise productivity and lower its costs.
  10. Mvic


    LOL ain't that the truth!
    #10     Feb 8, 2009