Saturday, March 6, 2010

If I offer to buy your groceries tomorrow, will you buy them with your own money today? Did not think so...-

Analogy:  If you were on your way to the grocery store with $100 to buy food and I stopped you at the door and offered you this deal:  "Postpone your purchase today. Come back tomorrow and I will give you $100 to buy your groceries".  Did I give you an incentive to come back to the store to buy food TOMORROW with my money?  Do you (or anyone) take this deal?  What if I originally borrowed that $100 I am going to give to you and sent the bill for it you your children (born or yet to be born) asking (forcing?) them to pay it back with interest out of their future earnings? So (follow me here)...I borrowed $100 from someone (or country(s)) today, that future taxpayers (children) will have to pay back with interest, to give to you to buy groceries you were already going to purchase in the first place...

Read this story...Substitute "you" with a business on their way to hiring someone.  Subsitute me with "Congress" and Substitute "child, born or unborn", with, well, "child born or unborn"....

Real life example (I have personal knowledge of this)---A local subsidary of a major corporation needs to hire 30 people (NEW JOBS!!)...If they see that Congress may pass this law but not until, say, May, do they have a financial incentive (30 X $5,000 = $150,000) to postpone hiring for a couple of months? They are going to hire these people anyway, why not wait and get the Tax Credit for it?? 

Whether it is "right" for businesses to respond this way is one question.  Congress seems to laying a Moral Hazard trap for businesses to fall into (delay what they were already going to do in exchange for a tax credit)...

In principal I have no problem with Congress trying to incentivize businesses to hire NOW...Seems like this would have potentially been more effective LAST year...The job situation is stabilizing and there are hints that the picture will improve in short order...This kind of indecision/delay on the part of Congress (Dems AND Reps) only slows down the process of recovery.   Borrowing money to pay businesses to do what they were going to do anyway...You be the  judge as to whether this is effective policy...
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