Jobless Claims Ugliest in 16 Years

The U.S. experienced full employment during World War II: The jobless rate was a mere 2%. Early in 1977, the late Robert Edmonds an economist, L.V. Watkins, Jr. an attorney experienced in economic development and I, prepared the second of two reports for the Economic Development Administration that described a Human Investment Tax Credit program. We suggested a group of employment tax credits and provided research to support turning them into law. The 1977 job tax credit program, which reflected a few of the recommended incentives, generated 900,000 private-sector jobs, fully 20 percent of all new jobs created that year. To that moment (and perhaps since) it resulted in more jobs in less time than any single piece of legislation in our history. A Census Bureau survey showed that only 34 percent of all businesses were aware of the little-publicized program. Only a third of the eligible businesses utilized the credits. The White House opposed the job tax credit, and it was little advertised.

If promoted effectively, with all of the suggested incentives, it might have met the original goal of generating three million to six million new jobs and encouraging one million to four million people to become self-employed. Since Congress created the program over Administration opposition, the following year the program was gutted and became the targeted jobs-tax credit, with only a small fraction of its previous effectiveness. Unemployment is once again a most urgent problem. The tax incentives in the Human Investment Tax Credit program can readily be updated and voted into law. That should be the first order of business for the new Administration and Congress. What follows has been adapted from the Abstract that introduced the second report.

Curing unemployment without creating new inflationary pressures is clearly possible if we view the economy from new perspectives and adopt appropriate tools and policies. The primary addition in the second report was a unique analysis of causes of unemployment that suggests that overfull rather than merely full employment may prove possible. This analysis split employers into three categories: large corporations, medium corporations and government, and small business. The only category having the potential to absorb large numbers of new employees appears to be the small employer. It is worth repeating that a package of carefully crafted carrots could readily create 3 to 6 million additional jobs in the small business sector with another 1 to 4 million becoming self-employed. A small business employment reservoir, rather than government as an employer of last resort, appears to be available.

A coordinated alternative economic analysis is suggested as an immediate priority that could yield large dividends. L.V. Watkins seeks modest funds to updatethe Human Investment Tax Credit program. If rapidly updated and implemented, it can quickly attack the root causes of unemployment.

Mark Goldes of CA 12:34PM November 20, 2008