A Democratic lesson in job creation

Evidence suggests targeted tax credits work. So does electing Democratic presidents.

By Andrew Leonard
Published October 18, 2008 4:30PM (EDT)

Labor economist Daniel Hamermesh, writing in the New York Times' Freakonomics blog, offers some useful insight into the new jobs tax credit proposed by Barack Obama earlier this week.

On Monday, as part of a sheaf of proposals designed to provide short-term relief to Americans struggling in a tough economy, Obama unveiled a $3,000 tax credit for each job created -- in the United States -- by an American corporation.

Hamermesh, who says he worked on a similar intiative -- the "New Jobs Tax Credit" -- during the Carter administration, cites evidence suggesting the effectiveness of a targeted approach.

Unlike inefficient subsidies that provide funds for an activity that would have been undertaken anyway, this kind of marginal tax credit only subsidizes new activity. The benefit per dollar of credit is greater with this approach; it is more target-effective.

But really, there's no need to get fancy about it. If you want to boost private job creation in the United States, the historical evidence suggests that there is a very easy way to go about it.

Elect a Democrat.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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