Job Creation Tax Credit

One likely element of the second (or is it third?) stimulus jobs bill being kicked around in Washington is a tax credit for new hiring. Brad DeLong is circulating an economists' letter supporting the idea which says:

A well-designed temporary and incremental hiring tax credit is a cost-effective way to create jobs, and could work well in the current environment. At a time when GDP is beginning to rise and demand is starting to return, private firms are likely to respond to such a tax incentive by hiring sooner and more aggressively than they otherwise would have done. Such a credit could thus help put Americans back to work more quickly than otherwise. And by targeting firms that are growing, such a tax credit supports the businesses most likely to lead the recovery of employment.

In the Washington Post, Alan Blinder explains how to do it. Howard Gleckman, who is skeptical of the idea in general, says that the administration's version is much better than the proposal by Senators Hatch and Schumer.