With the wonderful fall weather come gardening activities I loath. But I appreciate the need to trim and prune now so I can see my backyard come alive in the spring.
This got me to thinking about the economic lessons from the movie Being There, in which Chance, the simple-minded gardener, becomes involved with some Washington rainmakers. Through his new friendships, Chance offers gardening advice that's mistaken as economic wisdom — spring follows winter, growth follows death, expansion follows recession. The movie is as fantastic as it is pure and the economic lesson, though flawed, is as simple as it is whimsical: Economies can still grow after they die.
However, the economic gardening "policy" outlined last week by President Barack Obama could prove quite fruitful.
The picture in the Peach State is pretty bleak. We sit near the bottom with respect to several employment statistics. With 10.1 percent of its population out of work, Georgia's unemployment rate is nearly a full point higher than the country as a whole. And between 2009 and 2011, Georgia lost nearly 29,000 jobs.
The president's plan to put people back to work — to cultivate, if you will — has some potentially successful elements, particularly for Atlanta. Obama's American Jobs Act includes a cut in the payroll tax — the payment into social security — which is evenly split between employers and employees.
Prior to the Tax Relief Act of 2010, both parties were responsible for paying a tax rate of 6.2 percent, which came to about $232 a month on the average Georgia salary of $45,000 per year. Under the new law, the rate was dropped to 4.2 percent, which means the average employee and employer each pay about $157 a month.
Obama's plan would further reduce the portion paid by workers to 3.1 percent. This drop translates into an additional savings of $41 per month, roughly one tank of gas. This doesn't sound like the kind of push we need.
The employer portion of the tax could be driven down to 2 percent. With this drop and extension — the 2010 Tax Relief Act expires next year — an employer with 50 workers would save about $90,000 per year. If the employer translates these savings into jobs, we're talking about adding two jobs for every 50. That would be impressive.
The American Jobs Act also includes tax breaks for hiring veterans and the long-term unemployed. Firms receive $4,000 for hiring a person who has been out of work for six months. Both of these elements have the potential to actually increase the number of persons employed, leading to lower unemployment rates. The plan also calls for more dollars for construction and school remodeling.
These plans remind me of my fall gardening and the warning of doing too little. For example, I don't look forward to cleaning my gutters. But the fall leaves could lead to big problems if not removed. I always remind my neighbors to "go long" when doing this task — put the ladder so that the end extends over and above the roof line. If the ladder is an inch short, you're going to fall 30 feet.
I fear that the first stimulus project, though seemingly big, was too small — an inch short and we're back at square one. We face this same issue again. We really don't have time to just kind of stimulate the economy.
A scaled-back version of this plan is unlikely to have any impact at all. If we want to achieve our objective of a strong and healthly spring garden, we have to start the groundwork in the fall. The cultivation process is hard work and can — and does — require a lot of resources. But if done correctly, the end result is worth the effort.
Thomas More Smith is assistant finance professor at Emory University's Goizueta Business School.
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