To achieve the goal of increasing private-sector employment and productivity, Congress should provide businesses with tax credits for a portion (or all) of the net new hire payroll cost that they add from today until the end of 2010. Small businesses know how much they pay in taxes. Big businesses spend millions of dollars finding ways to lower their tax bill. If businesses can use money to hire a person to produce a good or service that will grow their businesses instead of paying taxes, they will.
With roughly 155 million people in the U.S. workforce, and a 7.5 percent unemployment rate, the $800 billion could be used to put the unemployed to work. It equates to more than $68,000 per unemployed person.
Third, the provision that "manufactured goods" purchased with stimulus money, are to be made in the United States is a clever slogan. However, when making policy that affects international trade – it is imperative to think about the potential ramifications.
As Dr. Ray Hill, who teaches finance and economics at the Goizueta School of Business at Emory University in Atlanta, noted in an e-mail exchange, “The result is that the "buy American" provisions will only be netted out by reduced demand from abroad and world economic activity will shrink further. It would be a huge tragedy for us to repeat the protectionist mistakes that we (and other countries) made in the 1930's that worsened the Depression.”
Common sense might once again lead us to reconsider a direct job stimulus program versus restricting trade. More U.S. jobs would mean more goods and services to sell to all countries, including to China and the U.S. markets. We need to continue to open up trade and become more competitive in the global market.
The U.S. Gross Domestic Product (GDP) is a measure of our nation’s economic health. In 2006 and 2007, real GDP grew 2.8 percent and 2.0 percent respectively. In 2008, GDP grew 1.3 percent with the last two quarterly figures reflecting a decline in economic activity (-0.5 percent, -3.8 percent).
GDP can be increased in two ways: by increasing real output or through inflation. To increase the real income of a nation, there has to be a real increase in real goods and services valued by customers, businesses, governments and foreigners. And who produces this additional output? Americans do. Let’s put them back to work.
Going forward – let’s apply the common sense test – after all, uncommon sense is what got us here.