The President was here in New Hampshire Tuesday speaking at a town hall meeting; he reiterated the theme unveiled a few weeks ago that jobs “will be our number one focus in 2010.” I don't know about you but I'm wondering why it took so long to come around to that point of view.
Refreshingly, he did mention small business – which we know is an important driver of the economy. However, the proposals being floated in the so-called jobs bill aren’t likely to have much impact. Worse, the spending ultimately may do more harm than good.
For example: $30 billion intended for banks to lend to small businesses. Most agree that lack of capital at the banks isn’t the issue…rather, it’s a dearth of creditworthy borrowers, along with the fact that businesses are spooked and don’t want to bite off loans just now.
Or there’s this proposal: small business tax credits for every net new employee hired. This is touted as the most robust component of the bill...yet one best-case-scenario projection has it adding only 297,000 jobs to the economy (remember, 7.2 million have been lost so far with more than 15 million people in total out of work.)
That will hardly put a dent in the unemployment rate.
Keith Hennessey reports that Dr. Mark Zandi, an economist who recently testified before the Financial Crisis Inquiry Commission, theorized that in order for a jobs creation bill to have an impact it would need to be in the neighborhood of $200 billion.
And what would $200 billion buy? Zandi says it'd reduce the chance that the economy will slip into another recession and reduce the future unemployment rate by half a percentage point. That's it. (And this is from a guy who thinks it's a good investment.)
Of course it would also add $200 billion to an already dangerously bloated deficit.
Spending like drunken sailors eventually has consequences (with apologies to drunken sailors everywhere – as one reporter said last week, at least they can’t spend money they don’t have). The U.S. has been on a spending spree for quite a few years.
One big casualty? Employment.
Remember when money was cheap and all those people borrowed and borrowed and borrowed? We all know what eventually happened. Now it's Uncle Sam who is seriously overstretched; payments to service the debt are already steep and projected to skyrocket. Wait until interest rates start to go up. This won’t end well, either.
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