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My Naive Plan to Put America Back to Work

Disclaimer: I am a computer programmer, not an economist, politician, or even a fancy space chicken lawyer. Read at your own risk.

Where We Are

The Department of Labor recently released their unemployment figures for July. Currently we stand at 9.1% unemployment, which is roughly 13.9 million people unemployed. This is pretty much where unemployment has stagnated for about a year.

What We've Tried

We've basically tried 2 things, increasing government spending and decreasing taxes. Both were part of the "stimulus" bill passed. Of the $787 billion stimulus, $507 billion was dedicated to spending (though not all of it ended up getting spent). The other $282 billion was dedicated to tax cuts.

The stimulus bill was likely pivotal in halting the 2 year trend of unemployment going up, but didn't do much to put people back to work. One problem with increased spending and tax cuts is that they are indirect methods of creating jobs. The government buys more goods and services, hoping businesses will need to hire more workers to fulfill new demand. Cutting taxes is pretty much the same, hoping that more money in consumers' and businesses' pockets will cause them to buy more, creating new demand.

My Proposal

My proposal would be to *directly* influence private sector hiring. Instead of giving more money to consumers and businesses hoping it will influence hiring, let's flat out give businesses money for hiring employees.

I suggest that the federal government pay 50% of the cost of any additional employees a business hires for 2012, and 25% of that employee's cost for 2013.

At first glance, that sounds like that would cost our government a fortune, but it actually would be relatively cheap and effective. Let's assume the average cost of a new employee is a generous $60,000 (salary + benefits). For 2012, the government is going to pick up half that amount: $30,000. We currently spend roughly $200 billion per year in Iraq and Afghanistan, so for 1 year, let's spend that much on putting America back to work.

For $200 billion at $30,000 per employee, we could pay for creating 6.67 million new jobs, which would reduce unemployment to the normal rate of 4.8%. Naturally, this plan will cost us a $100 billion in 2013, for a total of $300 billion, which is less than 2 years of wars and less than half the cost of the stimulus.

One can also assume that the actual cost easily be much lower, as each new employee is now contributing income tax, social security tax, and medicare tax to the government, and is no longer being paid unemployment from the government.

Benefits

There are several benefits to this proposal.

- First off, it is increasing private sector hiring, not public sector. The plan doesn't expand the headcount of the federal government, so we aren't creating jobs that are going to continue adding to the federal budget year after year.

- Secondly, it's not a giveaway for businesses. By requiring a 50% investment from the private sector, we are giving businesses a vested interest in creating useful, productive employees. They aren't just gorging on free labor for a limited time.

- Third, it's a temporary, limited cost to the government. 50% for year 1, 25% for year 2, 0% for year 3. Will there be businesses that lay off their new employees after the 1st or 2nd year is up? Sure, but probably not as many as you might initially think. It's not like these employees were free and now they cost 100%. Because businesses were already themselves investing in these workers, if they're worth keeping, the 25% is going to be worth it. And even if the employees get laid off, they at least spent a year or two participating in the private sector, paying taxes and growing the economy, rather than sitting around on unemployment.

- Finally, it only costs money if it's effective. If businesses don't think it's worth it to hire new employees at half cost, then the plan doesn't work, but it didn't cost us anything. However, I think there's plenty of employers who are on the fence about hiring who would jump at getting new employees at a discount.

Errata

Yes, you have to carefully craft the bill to enforce actual new jobs, not playing with numbers like firing 10 people and then rehiring them back as "new" employees. If your headcount was 50 at the end of 2011, then only headcount over 50 would be creating new jobs.

The bill would probably have to be introduced and passed rather quickly. Once the bill is introduced, people are going to freeze their hiring until the bill goes into effect. Maybe the initial headcount date is set at a date before the bill is introduced, and the 50% will be retroactive to that date.

Obviously you would need loop-hole-ologists to carefully craft a bill with the desired results, but that's one job we probably have an abundance of in DC.