A $33 Billion Employment Program Follows a $75 Billion Housing Plan

President Obama has decided to propose a $33 billion program to drive new hiring, particularly among America’s small businesses. The system would be based on tax credits for every new worker hired. The benefit would amount to $5,000 per person added to a company’s payroll during 2010 with a cap for any one firm of $500,000.

The issue with this sort of program is that it is hard to check and even harder to administer. A new worker might be an old worker rehired after six months off the job, or he might be a part-time worker who is given full-time employment. Companies are likely to claim the credit for all sorts of new workers who may not be, in the strictest sense, new workers at all.

The White House has not given any details about the $33 billion program, but it would certainly have to involve several federal agencies to confirm when companies add new workers and to make certain that the tax benefit goes to those companies quickly to partly offset their costs of adding people. A credit that is delayed for a year is of little help to a firm with ten employees.

The program may go the way of the $75 billion mortgage relief plan that the Administration put into place early last year. Its goal was to keep people in their homes through mortgage modifications which involved banks working as middlemen to change the terms of home loans. The program drew hundreds of thousand of applicants but difficulty in verifying who qualified for the aid and complex paperwork has nearly scuttled the effort and Washington has not come up with a way to eliminate the red tape.

The nature of large federal government programs which are meant to create jobs one-by-one or aid homeowners a single house at a time is that they rely on hundreds of thousands of acts to be successful. One small business in California hires a single person. Another small business in Florida hires two. A company in Michigan fires three people and hires four. All of this data has to be compiled and makes its way to the IRS.

The maze created by federal government incentive programs often makes these programs failures from the start. The plans may be well-intentioned, but their complexity undermines them. The Administration and Congress would be better off to hire people directly, put them on the federal payroll, and assign them to the companies that need them. At least the government could probably keep track of that.

Douglas A. McIntyre