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EconomicPolicyInstitute October 23, 2009

Almost two straight years of steady job loss and a national unemployment rate of 9.8% have elevated the call for more government intervention to create new jobs. On October 20, EPI released a targeted proposal for a tax credit that would create millions of jobs over a two-year period, along with a broader five-part plan for creating some of the 10.7 million jobs that are now needed to return the country to pre-recession levels of employment.

Tax credit offers efficient way to create jobs
Labor market experts Timothy Bartik of the W.E. Upjohn Institute for Employment Research and John Bishop of Cornell University outlined the details of the policy initiative in two briefing papers, The Job Creation Tax Credit and Complementing Recovery Policies With a Jobs Creation Tax Credit.

The tax credit outlined in the papers would cover 15% of expanded payroll costs in 2010 and 10% in 2011, and would create an estimated 2.8 million jobs in 2010 and 2.3 million jobs in 2011. The authors calculate that most of the $80 billion gross revenue cost of the credit in 2010 and $67 billion gross revenue cost in 2011 could be recouped through tax revenue from increased economic activity and through lower spending on unemployment insurance, Medicaid spending, and other safety net programs.

Investing in infrastructure and aid to states
In addition to the above briefing papers, EPI simultaneously released two companion pieces that offer more context on the jobs crisis.  In Generating Jobs for a Robust Recovery, EPI President Lawrence Mishel examines the underlying causes of the unemployment crisis and the urgency of building on the progress of the Recovery Act passed earlier this year to create more jobs. In The Plan to End the Jobs Crisis, EPI Vice President Ross Eisenbrey outlines EPI’s five-pronged strategy for creating jobs and protecting those who have lost jobs. His recommendations include strengthening the safety net through nutrition assistance, extended unemployment benefits, and other social programs; providing fiscal relief to the states; creating more public service jobs; investing in national infrastructure; and passing a job tax credit to give employers more incentive to hire more workers.

Robbing Peter to pay Paul
Amid growing signs that more needs to be done to put people back to work and protect those who cannot find jobs, EPI’s Eisenbrey called out lawmakers for trying to block unemployment benefits for 1.5 million people who  have been out of work for so long that they have exhausted their eligibility.  In a commentary posted on EPI’s Web site, Eisenbrey pointed out the fallacy in the efforts of some Senate Republicans to block the extension unless it was funded by money earmarked for creating new jobs.  Eisenbrey called the proposed plan “a truly extraordinary example of robbing Peter to pay Paul.”

Retiring the American Dream
A new paper by EPI Economist Monique Morrissey outlines how the American dream of a secure retirement is disappearing for millions of workers. Toward a Universal, Secure and Adequate Retirement, published by Retirement USA, outlines why the United States needs a new approach for helping workers achieve financial security in their retirement. The Retirement USA project is an initiative that includes EPI, the Service Employees International Union, The Pension Rights Center, the AFL-CIO, and the National Committee to Preserve Social Security and Medicare. It was launched to ensure that all U.S. workers are covered by a plan that provides secure and adequate retirement income.

In related research published on EPI’s web site, Morrissey highlighted how tax breaks for retirement savings are skewed overwhelmingly in favor of top earners. Since these tax breaks are tied to a participant’s income tax rate, Morrissey says, low income tax payers receive modest or no tax subsidies for each dollar put into these plans. Using data from the Tax Policy Center, Morrissey found that workers with incomes in the top 20% received an average annual tax break for retirement savings of $3,297. The lowest 20% of earners, by contrast, saw an average annual tax break of only $2.

The best of the health care bills
Senate lawmakers this week are attempting to merge two competing pieces of health care reform legislation, from the Senate Finance Committee and the Senate Health, Education, Labor, and Pension (HELP) Committee. While the two bills have much in common, EPI’s Director of Health Policy Research, Elise Gould, stresses that the HELP bill is far superior. In the Policy Memo, The Best of the Health Reform Proposals, Gould and researcher Alexander Hertel-Fernandez stress that the HELP Committee bill goes much further toward guaranteeing affordable insurance for all Americans and setting up large and efficient public insurance exchanges. he authors stress, however, that a competing reform proposal from the House of Representatives is superior to either Senate bill.

Gould also illustrated why financing health reform with a tax on high-cost health plans could actually make health care less affordable for many Americans. In her feature on the EPI Web site, Senate proposal would affect one-third of health insurance plans, Gould says the tax proposed by the Senate Finance Committee would affect not just the so-called Cadillacs of health insurance, but a lot of ordinary plans as well.

Prospects for No Child Left Behind
EPI has published a policy memo by research associate Richard Rothstein analyzing the recent decision of Secretary of Education Arne Duncan to reauthorize the Elementary and Secondary Education Act (ESEA), the chief vehicle for delivering federal funds to schools serving low-income children. In The Prospects for No Child Left Behind, Rothstein says that Duncan’s principles for re-authorization actually seem to address most of the key objections raised to No Child Left Behind law, as it is currently enforced, despite his seemingly contrary vow to quickly renew the law with minor modifications.

“Trying to maintain the existing flawed system while figuring out a new one is likely to be a frustrating endeavor,” Rothstein wrote. “Rather than rush into a hastily designed policy that risks unforeseen and dangerous consequences, as was done in 2001, now is the opportunity to make a fresh start. The Obama administration’s ESEA re-authorization proposal should reject the continued punishment of schools based on flawed standardized tests, and instead focus on the careful and cautious design of new forms of qualitative evaluation.”

From the EPI Blog
Lawrence Mishel and Will Kimball
The Top 1 Percent of Wage Earners Falters in 2013—Was it a Temporary Event?
Joshua Smith
Myths and Facts About Corporate Taxes, Part 2: Will Congress’s Idea of “Base-Broadening, Rate-Lowering Tax Reform” Fix What’s Wrong With Our Corporate Tax Code?
Ross Eisenbrey
Corporations Are Stealing Your Constitutional Rights: Forced Arbitration Clauses
Lawrence Mishel
Chair Yellen Is Right: Income and Wealth Inequality Hurts Economic Mobility
Ross Eisenbrey
Businesses Agree—It’s Time To Raise the Minimum Wage
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