Very interesting piece today in Slate on how the Bush tax cuts may be directly responsible for the lack of job growth these past two years. It's a bit wonky, and I don't have enough of an econ background to do a full analysis myself, but... my first reaction is that the analysis largely seems sound. Any thoughts?
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| That explains why accelerated depreciation might not accelerate domestic hiring. But Ritholtz suggests that, because of a change in the nature of some capital goods, "the rule has had an unambiguous macro impact on the broader economy: Large capital purchases have come at the expense of hiring." Ritholtz hypothesizes that many companies have taken advantage of the temporary rule to increase their purchases of so-called enterprisewide applications. These are big, expensive software packages, made by companies like Cognos and Business Objects, that are designed to make operations more efficient. Buying a new copy of Adobe Acrobat 6.0 might not be a capital purchase, but when a large company like Home Interiors & Gifts Inc. installs BusinessObjects Data Integrator across the corporation, it can be. The rub is that such products, production and installation of which isn't particularly labor-intensive, are expressly designed to allow companies to operate with fewer—rather than more—employees. These productivity-enhancing solutions are supposed to pay for their expensive selves over time through reduced labor costs (read: fewer workers).
In theory, greater productivity is supposed to free up more resources for companies to invest, grow, and hire. But for the past few years, U.S. companies have proved to be remarkably shrewd about doing more with fewer—or the same number of—workers. And the temporary accelerated depreciation rule may have given companies an extra financial incentive to invest in these productivity boosters precisely at the time the administration was hoping they'd be creating new jobs. |
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