Another Plan to Spend Our Way to Prosperity

The PA House Democrats unveiled their “jobs plan” yesterday. In short, it is more of the same failed policies of the past, i.e. those of Ridge-Rendell and Bush-Obama. Here are some of the specifics:

• A tax credit to encourage businesses to hire workers and provide “on-the-job training”. Clearly House Democrats acknowledge that lower taxes create jobs – they simply want higher taxes on all businesses to be able to make the tax code more complex in order to manipulate behavior.
• Expanding the Small Business First program to include larger businesses, as well as “reinvest” (code for spending more tax dollars) on Business in our Sites, Small Business Incubator, and Small Business First. These programs are part of the Pennsylvania’s 2nd-highest-in-the-nation corporate welfare spending, which has proven to fail.
• A resolution to encourage higher subsidies for Summer Youth Employment and Adult Employment. Of course, these subsidies are necessary, in part, because of the minimum wage increase passed a few years ago that made it more expensive to higher worker, and drove up unemployment among youth. Indeed, many agencies with summer youth jobs programs are among those facing cost pressure due to this well-intentioned, but economically ignorant policy.
• A work-sharing program which would provide unemployment benefits for those who had hours reduced – to encourage companies to cut hours rather than lay off workers. There are two obvious problems with this idea.

  First, it doesn’t do anything to help the overall economy – it might make the unemployment data look better, but you’d have an equal and opposite effect by reducing wages (with increased cost to taxpayers for government subsidizing some of the lost wages). It is manipulation of one set of economic data, rather than a path to recovery or prosperity.

  Second, it adds more costs to a state Unemployment Compensation system which is already $2 billion in debt and losing money. Ostensibly, the program would require employers to pay the full cost, only if they opted in to work-sharing. But if this is true, it doesn’t need to be tied to Unemployment Comp – in fact it doesn’t need to be a government program at all; companies could simply set up their own work-sharing program.

If I were a cynic, I would suggest this is simply election year pandering fifteen months into a recession.

To discuss some real ways small businesses can for stimulate our economy, come to one of our RE Harper Economic Forum: Small Business vs. Big Government, next week in Pittsburgh, Valley Forge, and Lancaster.