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Cash for Flunkers?: Tax credits for hiring the unemployed and the law of “unanticipated” consequences.

*Disclaimer: Almost all people who are out of work are unemployed through no fault of their own. I have great sympathy for you and understand the worries you have for the well-being of your families and wish you God’s blessings.

H/T to Haystack for his excellent diary on free markets. This post started out as a comment to your diary,  but (I believe) addresses a separate issue.

Mr. President, you’re not helping. The proposed jobs bill is another Cash for Clunkers disaster in the making and will hurt the economy rather than help it.

If a business does my neighbor and his family a favor by advising they will have to lay him off in 60 days, it may actually be better economically for him to lose today the job he loves and is good at (rather than through the grace of God retaining his current job for a few more months). That way, that same company (or a different one) would be more likely to hire him in the future.

One of the proposals being floated around the Hill and the business community is to provide tax credits to businesses that hire individuals who have been unemployed for over 60 days. But if incentives are to be given, they need to be given across the board. Otherwise, the “unanticipated” consequences created by these tax credits will cause more problems than they solve.

In difficult economic times, businesses often have to lay off high-salaried employees as well as entry-level positions. Although definitely not the rule, “more qualified” individuals are usually the last to be laid off. The free-market again will be turned on its head, however, if tax credits are only granted to businesses that hire individuals who were the “first” to be laid off.

For instance, what if you’ve been out of a job for 2 weeks (and like all of us, desperately need a new job?) If you are the “more qualified” applicant, you will still be less likely to be hired (as a business will receive a tax credit for hiring a “less” qualified individual who’s been unemployed for over 60 days). With a limited amount of capital in the private sector and an uncertain future, you could be out of work for a longer period of time than the person who is hired. In another scenario, a company would have a tax incentive to lay you off and then turn around and hire someone else to fill your exact same position on the very same day.

And that’s just addressing those who have been out of work. What about the person who wasn’t looking for work-and is therefore not considered “unemployed,” who may have just graduated from high school or college, been recently widowed or divorced, or was providing long-term care to an aged or sick family member? They need a job just as much as the other guy, but in effect will be penalized.

Having Obama as the CEO of the USG, major U.S. car companies, and banks is bad enough, but I sure don’t want him running (and ruining) the private sector as well.

*Another question: Will individuals who have been unemployed for more than 60 days be required to have accepted unemployment insurance in order to “prove” they are unemployed?

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