The federal government cannot create private sector jobs, but it can try to nudge the private sector to pad its payrolls. In March, the president nudged softly when he signed the HIRE Act, a modest tax cut, which kills employer payroll taxes on every new hire who'd been out of week for at least 60 days.
With an estimated price tag of $13 billion, it was a sliver of a bill, an entry pass to start a larger job creation strategy that never panned out. Larger job creation efforts -- like a $200 billion hodgepodge of unemployment benefits, state aid, and tax measures -- failed repeatedly in the Senate, and now lies in ruins.
The White House is pushing for an extension of the HIRE Act to let employers claim this tax break on new hires through the first six months of 2011. But rather than a strong move in the direction of job creation, it's a stark reminder of how dim the prospects for further fiscal stimulus are in Congress, where the deficit numbers now loom larger than the unemployment figures.
It was widely acknowledged that HIRE was intended to be a first step rather than a cure-all for the economy, one Senate aid told me. Democrats assumed that this targeted payroll tax cut, the bipartisan brain-child of Sen. Chuck Schumer (D) and Orrin Hatch (R), would assume broad Republican support. Instead it only picked up 11 Republicans, not including Hatch. It is the only major jobs bill to have passed Congress, besides a handful of unemployment insurance extensions in the last 12 months.
The Congressional Budget Office
predicted that the bill would at most incentivize about 300,000 additional jobs (it's a tough count, since many employers who claim the credit would have hired anyway). That would mean this bill moves forward job creation by about a month and a half. It's not clear how extending the program by nine months is going to create jobs this week or next month, and it's impossible to argue that a $20 billion tax credit is going to lift around a limping $14 trillion economy. But as the last White House put it, you go to war with the army you have, and HIRE is the only troop we've managed to call up.
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