President Obama, Senators Advance Payroll Tax Cut to Spur Job Creation

This week, President Obama and Senators Schumer and Hatch proposed important job creation ideas similar to those advocated by NDN and Dr. Robert Shapiro over the past several months. At the core of these proposals sit payroll tax cuts or tax credits that reduce the employer’s cost of hiring, which NDN has advocated as the most effective way to spur employment in the near-term. 

Dr. Robert Shapiro, Chair of NDN's Globalization Initiative and former Under Secretary of Commerce for Economic Affairs, said this about the White House and Schumer-Hatch proposals:

Reducing the cost to hire at a time when the economy is encountering special problems creating jobs simply makes good economic sense, and reducing the employer's payroll taxes on new hires, when the employer is also expanding its overall workforce, is the most effective way to do it.  The proposals advanced by the White House and Senators Schumer and Hatch do just that. NDN has long promoted versions of this approach, and while there are no silver bullets for unemployment, understanding the dynamics responsible for weak job creation now and throughout the 2002-2007 recovery is a necessary first step to restoring real prosperity. Taking targeted action now by reducing the payroll tax for new hires a vital next step.

NDN congratulates the Obama Administration and Senators Schumer and Hatch for offering this important proposal and will work for the rapid passage of this measure. For Shapiro's advocacy of such an approach, which dates back to October, please see:

• January 20, 2010, The Path to More Jobs and Growth – "It’s virtually the only proposal that’s actually targeted directly at job creation, and it’s effective because it directly reduces a company’s cost to create new jobs. Its’ projected power to boost GDP follows directly from its success in creating jobs, since the new workers would spend virtually everything they earn, boosting output in the goods and services they choose and the jobs required to provide those goods and services." 

• December 4, 2009, Video of the White House Forum on Jobs and Economic Growth: Encouraging Business Investment, Competitiveness and Job Creation working group in which Dr. Shapiro discusses this proposal. 

• December 2, 2009, How to Create Jobs in a Troubled Economy – "Exempt from payroll taxes the first $3,000 to $5,000 of wages paid in each of the first two years to new hires by firms that expand their work forces."

• November 2, 2009, The Storms on the Economy’s Horizon – "An even better idea would be to jumpstart new job creation by exempting the first few thousand dollars of wages from payroll taxes."

• October 8, 2009, What Washington Should Understand and Do to Create Jobs – "Businesses would receive a tax credit for the first year of payroll taxes on new employees or those moving from part-time to full-time, and a credit for half as much in the second year." (Also posted at The New Republic and NPR.)

For more of NDN's work on the economy, please see our backgrounder on "A New Economic Strategy for America."