Thu, 29 Oct 2009

Tax on Hiring

The US Sentate is currently considering a bill designed to pay people to be unemployed, and to penalize any private parties that still employs people.

Well, that's not exactly how the bill is written, but that's how any economist will read it. They're planning to extend unemployment benefits, which would otherwise run out. This has the effect of paying people to have the job of being unemployed. When you buy more of something, anybody who has a supply of it will step up to the plate. So rather than take a job, any body just to get income flowing again, the US Senate is encouraging people to stay unemployed.

The other thing they're doing which "helps" the recovery is to raise the unemployment insurance payments that employers have to pay when they employ someone. This is a tax on employment, and makes it more expensive to keep someone employed. Anybody whose employment is on the edge will get kicked over and kicked off.

When you tax something, you get less of it. When you subsidize something, you get more of it. Thus it has always been, and thus always have politicians ignored that face. It's the economist's burden to always have to tell them that their grand plans are doomed to failure.

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