Wednesday, October 26, 2011

"Jobs Bill" Subsidies Won't Work Longterm

The President's "Jobs Bill" (which, as a reminder, I will continue to refer to in quotation marks because it's not a Jobs Bill, it's a Stimulus Bill) died in the Senate a couple weeks ago, thanks to Senate Democrats (not Republicans, as Obama would like you to believe.) (1) Now the President wants the Bill passed in pieces. First and foremost, I can tell you that pretty much the only part that has a snowball's chance in July of passing is the Payroll Tax Holiday extension, because it's the only part of the bill that can't hurt the economy. (It won't help, by the way, but it can't hurt...temporary cuts won't cause hiring.)

Now there's the other parts of the "Jobs Bill" (the ones that don't have a snowball's chance in July of passing), the tax credits and hiring subsidies. These policies won't create jobs, and here's why: Businesses don't hire employees for one year. It's that simple, friends. Unless you're hiring a part time fast food employee for the night shift, at which point if that employee lasts one year then you're tickled pink, employers are looking to hire and train an employee who ends up working for them for five years or more.

Now that goal is not always achieved. However, an employee who works for a company for five years is going to bring at least 3 years of highly productive work where they require minimal additional training (although you'll always be training in a good company) and they reach a point where, even on their "bad days" they're still performing at a high level. I can say that from my current personal experience. I'm coming up on my two year anniversary with my current company in my current position. About a year ago, I hit my stride. Everything clicked. I got really good at my job and, even when I'm not at 100%, I still can put up respectable work on a daily basis. In my experience, this is pretty typical for most people. If you're qualified and a good match for your job, in 1-2 years you get to a point where the job clicks and you're good at it.

Now hiring for one year, on the other hand, is setting the economy up for disaster. Let's assume for a second that business owners really do hire an employee based on the subsidies. They perform a Cost-Benefit Analysis (CBA) and learn that, with the tax credits and other subsidies, there is a positive CBA for one year, and that the subsidies and tax credits eat up the new expenses created by the Obama Administration like Obamacare and other unnecessary regulations and push the CBA for the hire into the positive, at least from a purely fiscal perspective. (For those of you from Palm Beach County, FL, that's "decide that hiring will make money based on the money we have and how much money we can make.")

What does that business do the next year? The subsidies and credits have now expired, and the Cost Benefit Analysis for the next year is back to negative. So fast forward one year and all those employees who were hired are now back out of work, because it's no longer a profitable investment to retain that employee. And consider that it takes at least a year for an employee to become really, truly good at most jobs and require minimal supervision and additional training. So guess what? The Cost Benefit Analysis is once again is negative based on a long term outlook.

This is the problem with liberal quick-stimulus ideas. They simply do not work. Unfortunately, President Obama has never run a business nor made a payroll. He's never had to perform a Cost-Benefit Analysis. He's enacting ideas he and the other college professors came up with in a faculty lounge. I've said it before, I'll say it again: The "Jobs Bill" won't create jobs.

(1) Dear AP: Senate Republicans Didn't Block the Jobs Bill...Democrats Did

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