Thursday, January 7, 2010

Governor's Job Proposal

Yesterday was the state of the state speech. I agree with many sentiments in the speech: protect education funding, cut prison costs, reform tax code, cut state pensions. Yes to all, but I doubt we will see much on these initiatives.

What about the jobs proposal? Particularly, $500 million for worker training subsidies and $200 million for first time home buyer tax credits.

Why should a business get financial incentives to hire someone who a) is currently receiving unemployment, and b) needs training for the job; over another person who may not be in either category? Is there something wrong with hiring a new graduate or perhaps a spouse or family member of someone who is unemployed? What about someone who already has the skills? If you want to subsidize new hires, just do it directly, don't bother with these hoops.

Second, the $200 million in home buyer tax credits is just bad policy. The original $100 million was popular, but where is the evidence that it actually stimulated construction - I can't see it in the data at all. And it is inequitable. The primary people who benefit are home buyers (who are already profiting from the bust) and realtors for whom transactions = commissions. The resources are far better directed at mitigating preventable foreclosures.

The most important thing the Governor can do to help jobs this year is credibly balance the budget, and restore the state's bond rating. We are wasting millions on unnecessary interest expenses, and investors (not just bond buyers) in California are nervous about the state's long-term finances and political disfunction. Throwing another $800 million of new spending into the mix (that I believe is mostly transfers, unfair, and will generate little real growth) just makes the job of balancing the budget on time that much tougher.

The budget proposal released tomorrow is much more important than any of these new jobs proposals from yesterday.

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