That is because the centerpiece of the legislation is a tax credit for companies that hire people who have been out of work for at least 60 days. Many economists say such credits are inherently inefficient employment-boosting tools.
“The problem with subsidies such as this is that they are exceedingly sloppy. A lot of money goes to those firms that would have hired anyway,” writes Howard Gleckman, a senior research associate at the Urban Institute, in an analysis of the subject.
Trying to overcome partisanship
Aware of the sharp partisanship that has dominated their chamber in recent months, the pair pleaded with their colleagues to allow quick action on a bill they say reflects a balanced set of priorities.
Any delay in consideration of the package “will undermine our goal of timely action in the current economic climate,” said Senators Baucus and Grassley in a joint statement.
Specifically, the bill would exempt businesses from paying Social Security taxes for workers hired in 2010 who had been unemployed for two months. In addition, they would receive a $1,000 income-tax credit on every employee retained for a year on the firm’s 2011 income-tax return. The overall cost of this provision, according to Baucus and Grassley, would be $13 billion over 10 years.
The bill would also extend jobless benefits and healthcare coverage subsidies for the unemployed.
Closing tax loopholes to pay for the bill
Money to pay for the legislation would come from closing a number of tax loopholes, said Baucus and Grassley. For instance, the legislation would modify the tax treatment of certain substances that currently qualify as cellulosic biofuels.
The bill also includes a number of provisions that deal with Senate business that the chamber never got around to considering last year, when members were focused on the healthcare reform debate. These include, for instance, extension of a popular business tax credit for research and development.
President Obama has been pushing hard for Congress to move more quickly in response to chronically high unemployment numbers. Senate majority leader Harry Reid of Nevada had wanted to vote on a jobs measure prior to the upcoming Presidents’ Day holiday, but record snow has pushed back the Senate’s response.
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