I remember learning how magicians use sleight-of-hand to keep the audience focused on one hand, while they use their other hand to perform the trick.  This intentional distraction works well in magic and works wonders in politics.

The recent Jobs Bill has been supported by the government as a way to stimulate job growth by offering companies a tax-break when they hire employees who have been unemployed for at least two months.

The most a company can save is around $6,000 and that’s for an employee making more than $106,000 a year, so for most companies the tax break would be much less.

In today’s post I review the five steps of this magic trick, the hidden legislation in the bill nobody is talking about, and why you might get fired if this bill passes…

#1
Why would a company hire someone for $50,000 a year to save $3,000? Why not just save the $50,000 by not hiring anyone?

#2
Companies hire based on demand. If my company has enough revenue from sales to pay for 20 employees, hiring one more employee will not increase my sales.

#3
If and when my sales increase to the point that 20 employees are not enough, I will hire an additional employee.  I don’t need a government tax-break to do this since the additional revenue from the additional sales will pay for the new employee. This is how business works.

#4
If an employer fires an employee, or an employee leaves on their own, the employer will probably replace them. In my example, if I need 20 employees to handle my current sales, if one leaves so that I have only 19…it doesn’t change the fact that my current sales are too much work for 19 people.  I will hire someone as a replacement.

The government will count this as “stimulus”

If companies fire 1,000 employees and then replace them with 1,000 employees the government will claim that 1,000 employees were “added” to the economy through the government Jobs Bill.

#5
For all the news articles about the Jobs Bill out there, almost nobody mentions what else will pass if this bill passes.  Buried in the depths of the Jobs Bill are also the following…

• $20 billion in general funds to highway programs
• Delaying a scheduled 21 percent cut in Medicare payment rates to doctors
• An extension of the Patriot Act that includes the following that were set to expire…
  • Lone wolf
    • Allows government to track a target without any discernible affiliation to a foreign power, such as an international terrorist group
    • The provision applies only to non-U.S. persons
    • The government has never used it
  • Business records
    • Allows investigators to compel third parties, including financial services and travel and telephone companies, to provide them access to a suspect’s records without the suspect’s knowledge
  • Roving wiretaps
    • Allows the government to monitor phone lines or Internet accounts that a terrorism suspect may be using, regardless of whether others who are not suspects also regularly use them
    • The government must provide the FISA court with specific information showing the suspect is purposely switching means of communication to evade detection

What do highways, medicare and the Patriot Act have to do with job creation?

And of course, politicians ignore the unintended consequences of such a bill…

• As an employer, employee actions I used to ignore I might decide to suddenly take interest in. I might decide to write employees up when I normally wouldn’t for being late, or making mistakes, etc… just so I could fire them and replace them with another employee and get my $3,000 tax break.

• During interviews to replace an employee that left, I might prefer to hire someone who’s been unemployed for two months over someone who is currently working and trying to move because I only get the tax break for someone who’s been unemployed.

Abracadabra!

Categories: Government Failures

Tags: big government, economic collapse, economy, government spending, Healthcare Reform, Jobs Bill, recession, taxes, unemployment insurance