The HIRE Act is Here

With the coming eclipse of the behemoth legislative process that was health care reform, Congress was able to focus on the nation’s top public and domestic security concern: job creation.

Today (March 18th, 2010) at 11:27 am President Obama signed a much-anticipated jobs bill into law, hoping its measures will reduce the unemployment rate that has so plagued American confidence and livelihoods since the 2008 economic crisis. The President highlights the bill as an achievement for both business owners and those seeking jobs. Entitled The HIRE Act, the bill’s four core components include:

Tax breaks to reduce expenses for businesses: “payroll taxes will be forgiven for businesses that hire someone who has been unemployed for at least two months.”

• Business incentives to promote growth and thus increased employment opportunities: the law allows “small businesses to write off investments they make in equipment this year.”

• Stimulating new job sectors: “It will reform municipal bonds to expand investment in schools and clean energy.”

• Public works and infrastructure programs: “it will continue roadway infrastructure investment into the spring and summer, when, the president said, construction jobs pick up.”

Source: CBS Article

Originally a $150 billion proposal, the package was reduced to $17.5 billion to secure enough votes for its passage in today’s budget-wary public and political environment. Democrats say it is the first of a series of bills to promote job growth.

“A consensus is forming that, partly because of the necessary -- and often unpopular -- measures we took over the past year, our economy is now growing again and we may soon be adding jobs instead of losing them. The jobs bill I'm signing today is intended to help accelerate that process,” says Obama.

In his introduction of the bill Obama states that, by economists’ understanding of the stages of economic recovery, the United States is slowly moving forward. This is measured by such factors as whether an economy is growing, whether businesses have begun to hire temporary workers or increase employee hours, and whether businesses have begun to hire full-time employees again. However, he admits that for the hard-hit middle class on the local level, economic good times seem a long way off.

“I'm signing it mindful that, as I've said before, the solution to our economic problems will not come from government alone…But what we can do is promote a strong, dynamic private sector -- the true engine of job creation in our economy.”

Obama lauded all the members of Congress for passing the bill and stated that he was thankful that “over a dozen Republicans agreed that the need for this jobs bill was urgent, and that they were willing to break out of the partisan morass to help us take this forward step for the American people.” Emphasizing that economic recovery is “about all Americans” regardless of party and ideology, the President said he hoped this bill was a sign of more cooperation to come.

While optimistic about the future, the President did issue a disclaimer. “Now, make no mistake: While this jobs bill is absolutely necessary, it's by no means enough. There's a lot more that we're going to need to do,” he said, suggesting that helping small businesses to get loans and offering incentives to make buildings more energy efficient are among other needed changes.

There are, of course, those skeptical of the act’s potential. Some estimates say the tax break will create approximately 250,000 jobs by the end of 2010, but critics urge this is a trivial number given the 8.4 million jobs that have been lost in the recession.

I personally fear that, though $17.5 billion sounds like a significant amount of money, the bill falls far short of the tipping-point necessary to turn the job market around. Sadly, if this is the case, these billions will have been spent for little gain. I understand the political inertia around passing fiscally large, comprehensive bills—especially now when fear of big-government and national spending is so rampant—but I believe oftentimes this restraint comes at the cost of legislation being effective (and then what’s the point?).

Stay tuned for more information on the effects of this legislation as it becomes available, and for more expert opinions on how--and whether--government can create measures for a better job market.

All numerical information in this post is from CBS (http://www.cbsnews.com/8301-503544_162-20000700-503544.html).

A Discussion with Economics Professor Robby Moore

Robby Moore is the Elbridge Amos Stuart Professor of Economics at Occidental College. He has been teaching at Occidental since 1978, prior to which he was a Assistant Professor of Economics at Harvard University. Professor Moore has published four textbooks and has written in numerous journals including Quarterly Journal of Economics and the American Economic Review.

Today we sat down with Professor Moore to discuss the job market and the impact of the HIRE Act, the American Recovery and Reinvestment Act and the passage of Health Insurance Reform.

Q: Do you believe that the the stimulus bill was effective in saving jobs in the American economy?

RM: No, the bill was not focused enough to have any real impact. The stimulus should have been focused solely on job creation. I think it has had some minimal effect, but I think it was horribly designed. Any stimulus should be very targeted, very short term, and focused towards sectors that are hemorrhaging jobs. The better approach would have been a smaller stimulus that would have utilized tax cuts more effectively. Fixing the financial freeze on Wall Street was more important to the job market then the measures adopted by the stimulus.

Q: The CBO noted that the stimulus package has saved roughly two million jobs in the fourth quarter of 2009, what are your thoughts on this?

RM: Most economists look at net jobs created rather then this mythical figure of jobs saved. Jobs saved does not account for jobs lost in other sectors.

Q: What impact do you think the passage of comprehensive Health Care reform will have on the labor market?

RM: The passage of Health Care will most likely increase unemployment. This is a bill of trade-offs. While it increases accessibility, which could considered a good thing, it will create uncertainty for small businesses. Obama has tried to radically change the economy which will have and adverse effect on small businesses.

Q: Where do you think the job market is headed in the next 5-10 years?

RM: Well, for economists that a long time. Because of all of this uncertainty I don't see the unemployment rate lowering that much for a while. Most economists are saying it will take quite a long time. The main determiner of that is if we become a regulated economy. The way Obama is going we are looking more like Europe. Unemployment in France, Germany, and England over the past ten years has been much worse compared to here in the United States - and we are moving in that direction.

Q: Do you think the administration should be focusing solely on job creation? If so, what measures would you recommend?

RM: I believe in less regulation of the labor market. I also believe in eliminating the minimum wage for young workers. There are currently high rates of teen unemployment mostly due to the minimum wage. There is no easy fix, long term growth needs to be fostered in order to increase employment - its a tough to accomplish. If you can target the spending, like on infrastructure, that might be somewhat effective. Defensive spending might also be effective in creating new jobs, but this is unlikely to happen.

Q: Do you see the potential for job creation in the green energy sector?

RM: If it is in a sector that is not already filled to capacity, so one in which there is more room for growth, then its okay. However, it is still such a small share of the economy. Maybe 30 years from now it will be a big enough share to have a real impact. Right now the green energy sector represents less then 1% of our GDP.

Q: Any final thoughts?

RM: The government needs stop creating uncertainty within the job market. Tax cuts, as seen under Reagen and Bush would be helpful for small business growth. We must foster long term growth through less government regulations and restrictions.

American Recovery and Reinvestment Act... Did it Work?

While President Obama and much of the Democratic Congress is seeking to pass The Patient Protection and Affordable Care Act, many large news organizations have labeled the stimulus bill (American Recovery and Reinvestment Act) as another example of wasteful Washington spending, citing the 10% unemployment rate

However, estimates released by the Congressional Budget Office have assessed that the stimulus bill saved anywhere from 1-2 million jobs in 2009 alone.

While it is impossible to get any sort of accurate estimate on how many jobs would have been lost had the bill not been passed, most Americans (46% agree that the jobs bill did, at the very least, prevent an unemployment catastrophe in the US. (http://www.pollingreport.com/budget.htm)

A major push for the next job bill has yet to come, any sort of bill is likely to be attacked by conservatives who view the bill as more wasteful spending that will further the national debt and sink the economy in a deeper hole.

While many provisions in the original stimulus bill are controversial, it is clear that the American economy is still in dire need of another bill to stimulate job growth. Many Americans are still reeling from economic collapse and subsequent job losses, and are looking to point the finger somewhere. But as the numbers show, the stimulus bill is not the place for the blame to be directed.

Rasmussen Economic Indicators and Other News...

News on the job market has been relatively quiet the over the past week as the President makes his final push for health care reform.

For the time being, here is some helpful polling from Rasmussen Reports that examines consumer confidence.

These general economic metrics are tied with the health of the job market. As consumer confidence increases, more people will begin to inject money into the economy, leading (in theory) to an increase in employment due to increased consumer demand. Rasmussen Reports notes that consumer confidence is up 26 points from this time last year.

In other news, job losses remained steady in February. This is good news considering most economists were worried that we would slip into another recession, a so called "aftershock" of what people are calling the "Great Recession", leading to increased job losses. Despite this, as the article mentioned, the U.S economy still lost 36,000 jobs in the month of February. Both Congress and the Obama Administration must now focus on job creation rather then simply minimizing job losses. Doing so is easier said then done, but the viability of the current administration lies on its ability to deliver in job creation.

These numbers represent a step in the right direction, but much more work needs to be done to get millions of Americans working again.