Holly Cairns, MNVoter

Should we give small business owners money in the form of tax cuts?  Only if we want businesses open for a few, extra weeks. Businesses are not going to hire based on a hope that the economy will turn around.  Meanwhile, we only buy goods if we perceive our own, steady cash inflow.

If timed right, tax cuts simply help buy elections as they contribute towards the downward trend.

To reverse the downward trend, Keynes concluded that government can “prime the pump.”  If the consumer isn’t spending, the government should. Stimulus spending, especially in the form of jobs, produces slow, and steady results.

For those worried about debt and are thinking tax cuts are a better alternative to government spending, it’s worthy to note both tax cuts and government spending increase the deficit:

Those opposed to government spending prefer to stimulate the economy by reducing taxes to put more dollars into the hands of consumers and businesses. The fiscal impact of these two actions, spending and tax reduction, is the same: both increase the deficit all other things being equal. However, in the type of dramatic downward spiral we just experienced, tax cuts don’t help much. Consumers and businesses will hoard the extra dollars and not spend due to the crisis of confidence and the trauma inflicted by the severely reduced value of homes, pension accounts and business assets.

Minnesota Effort:  Government Spending, Bonding Bill:  “B” for Building, Which Means “J” for “Jobs”

Minnesotan legislators recently passed the omnibus bonding bill HR2700 (Senate companion SF2360.  Senate passed the bill and substituted the House language for their own, and sent it back to the House.)  The bill is government spending in the form of building infrastructure and would create construction jobs.  Before he even laid eyes on it, Minnesota’s Governor Tim Pawlenty said he’d veto the bill. Pawlenty wanted a smaller bill and was irritated by the lack of funding for a sex offender treatment facility, among other things:

While Pawlenty’s bill calls for $685 million in general obligation bonding, he said the budget forecast will allow for $725 million, perhaps setting a ceiling on far he’s willing to go….Pawlenty also requested $96 million to expand sex offender facilities at Moose Lake. “we need sufficient capacity to detain serious and menacing sex offenders in our state … That project was also not funded by Legislature.”

Hopefully Minnesota will see this job creation effort come to fruition.  The bill was retracted before it was vetoed.  There will be a motion to bring it back to the floor, first in the Senate, at 11:00 AM today, Thursday February 25, 2010.  Whereas Minnesota’s legislators used to say “That won’t pass and so why even try,” they are now publicly fighting back and forth with Tim Pawlenty.

Federal Efforts With Minnesota Ties:  MN Senator Franken’s Cash for Jobs Bill

Senator Franken’s “Cash for Jobs” bill is in committee.  The 10 billion dollar bill would reallocate TARP funds and provide $5 billion for wage subsidies to incentivize hiring in the private sector and the additional $5 billion would be dispursed as direct grants to states, local governments, and tribes to create green jobs.  Franken’s plan is based on a former, successful Minnesota program:

Sen. Franken’s ‘Cash for Jobs’ plan is based on a successful 1983-1987 Minnesota program, the Minnesota Emergency Employment Development program, that got 7,400 workers back on the job in its first six months.

HIRE Act

Today’s news is that the HIRE Act passed the Senate.  The HIRE Act amends the tax code to encourage building and changes bankruptcy law to protect workers.