Jobs Bill Headed to Obama's Desk. But Will it Work?

The Senate's $18 billion jobs bill is headed to the president's desk after 68 senators voted this morning to cut payroll taxes on new hires and extend highway and transit programs through 2010. The bill is offset under PAYGO rules by giving the IRS new powers to crack down on offshore tax abuses and by delaying an obscure tax credit.

The heart of the bill is a tax break for new hires first proposed by Sens. Chuck Schumer and Orrin Hatch. Here's how the credit works. Employers pay no payroll taxes for each worker hired in 2010 after February. The maximum value of this tax credit is equal to the payroll wage cap, or 6.2% of $106,800. If the employee is still around after a year, the employer gets an extra $1,000. "The beauty of this bill: It's simple, it's focused on private-sector job growth and it's paid-for," Sen. Schumer said. "It's modest, but ... it's almost a legislative dream."

Oh, it's modest alright. As I've written, by the CBO's count, $15 billion could create the equivalent of 120,000 and 270,000 full-time jobs for one year. That's not chump change. But the country would need 200,000 new jobs created each month for the next seven years to hit 5 percent unemployment by 2017.

The real job stimulus to watch out for is the $150 billion Senate bill that would, among other things, extend unemployment insurance and COBRA coverage. There is a fierce debate about how to create jobs through government spending. There is even a debate about whether that last sentence is tautologically impossible, since deficit spending allegedly distorts capital investment, encourages people to remain unemployed and dampens demand by raising the expectation of future taxes. In any case, I'm on the stimulus-now/deficit-reduction-later side of things, so I'll be keeping my eye on whether this jobs bill is the snowflake that starts another jobs-bill avalanche, or whether future stimulus efforts don't stand a snowball's chance in hell.