Obama's Economic Plan: History Does Not Look Kindly

In his major economic speech today, Barack Obama said:

Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy. That's why the American Recovery and Reinvestment Plan won't just throw money at our problems—we'll invest in what works.

For small businesses, that investment appears to be coming in the form of various tax incentives. First, one part of his plan is a $3,000 tax credit for each new hire.

Bruce Bartlett takes that idea to task:

A similar program was enacted in 1978, but a report from the Department of Labor's Inspector General during the Clinton Administration urged Congress to discontinue it because 92% of those hired under the program would have been hired anyway. An academic study found that 70% of the credits were payments for workers that would have been hired without them. Despite many efforts to reform the credit, it was eventually abolished in 2006.

Bartlett also skewers Obama's other major business proposal, bonus depreciation. Again, according to Bartlett, this only rewards businesses for things they were going to do anyway.

What the evidence I've seen so far suggests is that you can't find a shortcut for economic stimulus.  These temporary, flash-in-the-pan tax breaks might be better than nothing for businesses, but they're not going to do much. You need permanent tax and regulatory reform.