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Economists skeptical Obama's veterans jobs plan will cut unemployment rate
President Obama’s push to boost job prospects for veterans certainly looks to be well-intentioned, economists say, but does not appear broad enough to attack the deeper problems in the job market.
On Friday, the president proposed expanding or rolling out new tax incentives for companies that hire veterans, and called on businesses to employ or train 100,000 veterans or their spouses over the next two-plus years.
“I think we could all agree they’re marginally more deserving of the help,” Ethan Pollack of the left-leaning Economic Policy Institute said of former service members. “But to be honest, unemployment is a huge, huge problem in this country. And we should have an economic policy that doesn’t just single out certain people.”
Obama’s Friday tax proposals included a new tax break that would give businesses a maximum $2,400 credit for hiring a veteran who has been unemployed at least a month. Companies could get up to a $4,800 credit for bringing on a veteran that has been out of work at least six months.
The White House also wants to expand an existing preference that currently gives businesses up to a $4,800 credit for hiring veterans that were disabled in the line of duty, by adding a new credit of up to $9,600 for disabled veterans who have been jobless for six months.
In all, the tax proposals would cost $120 million over two years, the White House says.
“We still have a long way to go and a lot of work to do to give folks the economic security and opportunity they deserve,” the president said Friday, the same day the government announced the economy created a better-than-expected 117,000 jobs last month. “And that begins with connecting Americans looking for work, including our veterans, with employers looking to hire.”
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With the unemployment rate for veterans still several percentage points higher than the workforce at-large, an administration official this week said the White House would consult with the congressional tax-writing and veterans committees on its new policy pitch once Congress returns next month.
For their part, economic analysts say that the approach outlined by the White House would certainly give at least a little boost to the economy, but also stated that the benefits of the proposals seemed to be more political than economic.
The Tax Policy Center’s Roberton Williams, for instance, said it was “obviously a feel-good thing” to increase employment among veterans.
But he added that, based on the White House’s own cost estimates, the proposals would support 12,000 to 50,000 jobs. “Is this going to improve the employment situation?” Williams said “A little bit, but not much – more like a drop in the bucket.”
Williams and Pollack also both declared that, with corporations sitting on billions and billions of dollars in cash and consumer demand still sluggish, it made more sense to push policies that would put more disposable income in worker’s pockets.
“Employers aren’t going to start hiring, unless there is an increase in consumer spending,” said Pollack, calling that one of the reasons he backs the administration’s proposal to further extend payroll tax relief for employees.
And Williams stated that he was concerned that the tax credits would largely go to companies that were planning on hiring anyway. “That’s like free money,” said Williams, a senior fellow at the joint Urban-Brookings tax center. “In one sense, it’s like rewarding the firms that are already doing the best.”
Will McBride, an economist at the more conservative-leaning Tax Foundation, said that targeted tax proposals in general do not do much to boost job creation, as they don’t give companies the long-term certainty they crave.
“Holidays generally don’t make a lot of economic sense,” McBride said. “Politicians love to utilize tax holidays, but they don’t have all that much impact.”
Instead, McBride said policymakers should concentrate on a tax overhaul that lowered the corporate rate and eliminated some tax preferences, an area where Democrats and Republicans have already found some common ground.
As it happens, veterans’ employment appears to be another area for potential bipartisan cooperation.
The Veterans Affairs panels in both the GOP-led House and the Democratic-controlled Senate have already started to focus on jobs, with separate proposals from Rep. Jeff Miller (R-Fla.), the chairman of the House panel, featuring a tax credit for businesses hiring veterans and expanded access to the GI Bill.
The House committee is also holding a jobs summit shortly after Congress returns in September.
In the other chamber, Sen. Patty Murray (D-Wash.), the chairwoman of the Senate veterans panel, has introduced legislation that would give certain veterans up to two years of additional vocational training and allow them to begin the federal hiring process before they leave the military.
As for the president’s proposal, Peter Solmssen, the chairman of Siemens, which has vowed to hire 450 veterans this year, told The Hill that it was tough to specify what sort of effect that pledge or tax credits for hiring veterans has on the broader job market.
But Solmssen said that proposals that encourage the hiring of veterans allow companies to consider potential employees they otherwise might not have looked at.
“It’s easy to hire the person with the c.v. you’re looking for,” Solmssen said. “This makes people think a little beyond the four corners of the piece of paper.”
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