Spending From the TARP is the Same as Any Other Spending

USA Today told readers that spending for the Obama administration's new jobs tax credit would come from unspent TARP money. Actually, the spending will add to the deficit just like any other spending. The TARP money is budgeted as being returned to the Treasury. It makes no difference whatsoever whether the money is said to come from TARP or not, it has the exact same impact on the budget and debt.

It also would have been worth citing the extensive research on the minimum wage in the context of assessing the likely impact of this tax credit. This research shows that the demand for labor is not very responsive to moderate changes in the cost of labor. That meant, for example, that the 20 percent increase in the cost of low-wage labor associated with the 1996-1997 minimum wage increase had no measurable effect on employment. This implies that a 15 percent or so decrease in the cost of labor that would be associated with this tax credit is likely to have no measurable effect on employment.

--Dean Baker

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