Monday, February 15, 2010

The Senate’s New Job Creation Bill

After Obama announced his intention to make job creation a number one priority, Senate leaders moved quickly to put together legislation they hope will fix the ongoing unemployment problem in this country. Although there have been a few stalls, Congress is hoping to get some type of job creation legislation passed and signed into law within a few weeks.

Forgotten House Legislation

With all this talk about the Senate’s bill, many people have forgotten that the House of Representatives passed similar legislation back in December. Their plan would cost an estimated $154 billion but lost momentum after the beginning of the New Year when the Democratic party lost its 60 vote filibuster-proof majority.

Original $85 Billion Legislation

Early last week, the White House and Senior Democrats had announced their intention to vote on an $85 billion dollar package after negotiating with Republicans to come up with a bipartisan bill. However, after the full legislation was revealed it was met with fierce resistance from many liberal Senators who preferred the House’s bill.

Last Minute Reduction

After receiving criticism from numerous Senators, Majority Leader Harry Reid unveiled a new, lesser bill at the last minute on Friday. This new legislation combines about $15 billion in tax provisions, with about $20 billion in cash infusions into Federal highway and infrastructure programs, for a total cost of only $35 billion. However, these last minute changes angered Republicans who spent weeks working with Reid on a bipartisan bill.

What’s Left in the Bill?

  • Incentives to Hire

    One of the cornerstones of the legislation is the incentive for businesses to hire unemployed workers this year. All businesses that hire qualifying workers will get an exemption from the 6.2% Social Security payroll tax in 2010. Additionally, businesses that keep those workers for more than a year will be eligible for a $1,000 tax credit per employee. Data suggests this incentive would result in 180,000 new jobs, and cost an estimated $13 billion.

  • Capital Investments

    Another tax break for business owners that remains in the bill is a law that would allow businesses to write off up to $250,000 in capital investments in 2010 as opposed to depreciating those costs over time.

  • Expanded Build America Bonds

    The new bill would also extend the Build America Bonds program, which was a result of last year’s stimulus spending. The program subsidizes interest costs for local bonds issued to pay for infrastructure improvement and development projects.

Future of the Legislation

Unfortunately, the future of even this new legislation is questionable. Congress is on recess next week, but when they return on the 22nd Harry Reid is going to need to work on generating support for the bill. Top Republicans and Democrats expect that the legislation would fall short of the 60 votes needed to proceed, and even if does pass the Senate resistance is already building in the House of Representatives where top Democrats – including Nancy Pelosi – have expressed concern about the bill.

Is Something Better than Nothing?

I think Harley Shaiken, a professor at the University of California, Berkeley put it best when he was quoted in a Washington Post article asserting that the watered down legislation “is better than nothing, but it ought not be confused with a solution to the jobs problem." Since the recession began 8 million jobs have been lost, and current estimates show the stripped down legislation would only create around 200,000 jobs. It is going to take a lot more than just this legislation to stop the ongoing unemployment problem in this country.

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