Obama Announces $33B Hiring Tax Credit

Schmitt questioned whether the credit might prove inefficient -- small businesses that planned on hiring anyway could still reap the benefits of the credit.

"In any kind of context like this, you want to spend money on changing people's behavior. You don't want to give money to people for things that they were going to do anyway."

The same is true, he said, for ending capital gains taxes for small businesses, which is meant to increase their investment in equipment and other capital expenditures.

Even without the elimination of capital gain taxes, "how many of these people would have made those investments anyway?" he asked.

Obama today responded to concerns that the credit would benefit businesses that had already planned on increasing hiring.

"It's true that in some instances this tax credit will go to businesses that were going to hire folks anyway. But then, it simply becomes a tax cut for small businesses that will spur investment and expansion. And that's a good thing, too," he said. " And that's why this type of tax cut is considered by economists -- who rarely agree on anything -- to be one of the most cost-effective ways of accelerating job growth."

The president said that his proposal would also include provisions to prevent businesses from "gaming the system."

He said, for instance, that an employer would not be eligible for the tax credit if he doubled his workforce but cut each worker's hours in half.

"We're not going to let you game the system to take advantage of the tax credit, unless you're doing right by your workers," Obama said.

Tax Incentives for Investment by All Businesses

Whether they're for businesses large or small, incentives to get businesses to buy more equipment and the like benefits the economy because it may encourage suppliers to increase their payrolls to keep up with rising demand, supporters say.

While "it's not directly impacting the labor market, stronger demand for investment leads to strong hiring down the road," Faucher said.

But, once again, it may not be the most efficient way to encourage hiring -- at least not in the U.S. That's because so much of the manufactured products purchased by U.S. companies are made abroad.

"A lot of that money will not go to job creation here in the U.S.," said Schmitt. "A lot of it may go overseas."

$30 Billion From Repaid Troubled Asset Relief Program Funds to Community Banks for Small Business Lending

With the credit market still tight for small businesses, expanding lending to them would allow for more hiring, supporters say.

The money could be spent, specifically, for loan guarantees that the Small Business Administration provide to banks to ensure that they don't lose money when they lend to small businesses, said Gus Faucher, the director of macroeconomics at Moody's Economy.com. (The House jobs bill includes $354 million for SBA loan guarantees.)

"It's an area that would be helpful in getting job growth again," Faucher said.

But Schmitt said that extending more loans to small businesses may not have as big an impact as some might hope. As with the hiring tax credit, there are concerns about whether a lack of demand might render the proposal largely ineffective -- ie., why would businesses borrow to produce more goods when not enough people are buying those goods?

"Without demand in the economy for the goods and services of small business, the availability of credit is just not sufficient," he said.

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