A Stanford Professor's Recipe for Fixing Unemployment

I would trade all of Obama's economic team for Michael Boskin of Stanford in a heartbeat. Why can't we get guys like him to fix our economy.

My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed.

The payroll tax cut would have reduced firms' costs by roughly the same amount as from the entire decline in employment. It would have cost less than half as much as the stimulus bill, gotten far more income into paychecks quickly and, most importantly, greatly reduced incentives for firms to lay off workers. In fact, it would have created incentives to hire.

So this move would cost less then half of the failed stimulus and actually create 3 - 4 million jobs instead of "saving" just 1 million jobs in 400 phantom Congressional districts? Sign me up for this plan immediately.

Just use the rest of the failed stimulus to pay for it. I mean that money will probably just be poured down a rathole anyway so why not use it for a payroll tax cut? Then while they are at it have an across the board tax cut to all business regardless of size as long as they are expanding their workforce. That should get them hiring.

If Obama passes this payroll tax cut and unemployment drops I think the Dems could hold onto their gains in 2010. If not I think Obama will be "Carter 2: the Malaise" and preside over a double dip recession. In fact he is already afraid it might happen. So my advice to Obama sign Mr. Boskin up as Czar of Tax Cuts or something immediately. It might buy you a second term.