Senate Finance Committee Chairman Max Baucus and ranking Republican Chuck Grassley released a draft jobs bill yesterday that would cost about $85 billion. It “would give employers a payroll tax exemption for hiring those who have been unemployed for at least 60 days. The bill would also provide a $1,000 income tax credit for new workers retained for 52 weeks.” Click here to read a copy of the draft bill.

A bipartisan jobs bill would be great if that bill would create a significant number of new jobs. Unfortunately, analysts agree that many of the measures in the Baucus-Grassley bill would do little on that front. More details are after the jump.

Tax breaks for business as opposed to stimulative public spending are at the center of the Baucus-Grassley bill. Unfortunately,

The problem, everybody seems to agree, is that the reason most employers aren’t hiring is not that they are afraid of incurring more payroll taxes. Instead, it’s that there is not enough demand for their products or services to boost profits they would use to hire more workers.

That’s not just Democrats talking:

“We’re skeptical that it’s going to be a big job creator,” said Bill Rys, tax counsel for the National Federation of Independent Business. “There’s certainly nothing wrong with giving a tax break to a business that’s hired a new worker, especially in these tough times. But in terms of being an incentive to hire a lot of workers, we’re skeptical.”

The bipartisan Senate plan would exempt businesses from paying a 6.2 percent Social Security tax on the wages of new employees, as long as the workers have been unemployed at least 60 days. The tax break would run through the end of the year.

Companies could get an additional $1,000 on their 2011 tax returns if they keep the new workers for at least a full year.[…]

The nonpartisan Congressional Budget Office recently concluded that reducing Social Security taxes for companies that add workers would be among the most efficient ways for the government to create jobs. However, in showing how difficult it is to create jobs through tax policy, CBO estimates that such a tax break would generate only eight to 18 full-time jobs per $1 million in tax breaks.

The Baucus-Grassley bill is going nowhere. Senate Majority Leader Harry Reid made that clear just a few hours after the draft had been unveiled. Among other things, Reid will leave $31 billion in tax-extending provisions out of the jobs bill (though the Senate will debate some of those later). Grassley immediately complained:

“Senator Reid’s announcement sends a message that he wants to go partisan and blame Republicans when Senator Grassley and others were trying to find common ground on solutions to help get the economy back on track and people back to work,” said Grassley’s spokesperson Jill Kozeny. “Senator Reid did this just as Republican senators were saying they liked things in the Baucus-Grassley draft, which would have prevented billions of dollars in tax increases and offset any spending.  The Majority Leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis.”

However, The Hill noted that Senate Minority Leader Mitch McConnell “declined to endorse the Baucus package.” Sounds like were were headed for another round of “Republicans water down bill, then vote against it anyway.”

Reid will push forward with a more limited jobs bill, centered around:

  1. A tax credit, proposed by Senators Schumer and Hatch, for small businesses that hire new workers (see more here)

  2. More Build America Bonds, which make it easier for state and local governments to borrow money (see more here)

  3. Section 179 Expensing: helps small businesses grow by allowing them to write off more of their expenditures

  4. About $20 billion for the Highway Trust Fund.

Chris Bowers discussed the key differences between Reid’s approach and the jobs bill the House of Representatives approved in December. He concludes, “yet another good, but already too small, bill has been further gutted by the Senate.  The jobs bill coming out of the Senate is still better than nothing, but it will not make much of a dent in the broader employment picture.”

Hatch and Schumer made the case for their payroll tax break plan here.

On a related note, Iowa Independent published a good piece by Mike Lillis on the particular challenges facing the long-term unemployed. The number of Americans who have been unemployed for at least six months recently set a new record, even as the overall unemployment rate fell slightly.

LATE UPDATE: Excerpt from a statement Grassley’s office released on February 12:

The expired tax relief addressed in the Baucus-Grassley legislation included the biodiesel tax credit, which has created renewable energy jobs in 44 states, including Iowa.  Jobs are being lost in Iowa right now because Congress let the biodiesel tax credit expire on December 31.  Other tax relief that has expired and which would have been extended under the Baucus-Grassley proposal includes a property tax deduction for taxpayers who don’t itemize, the tax credit for teachers who buy classroom supplies, relief for flood recovery and rebuilding in the Midwest, and the research and development tax credit for businesses big and small.

Senator Grassley and Senator Baucus presented their draft legislation this week in order to allow all senators to provide input and feedback on legislation to help create economic activity in the private sector.  Grassley and Baucus were working for a transparent legislative process and to build broad-based support for an initiative.

On Thursday afternoon, the Senate Majority Leader, Senator Reid, pulled out the rug from that effort, announcing that he would bring to the floor a partisan jobs bill for senators to take or leave, without any opportunity to improve it through amendment.  A very rich spending program dressed up like a tax cut, the Build America Bonds program, is at the center of the Reid proposal.  The announcement was a surprise because Senator Reid had signed off on the Baucus-Grassley proposal the previous day.

Senator Tom Harkin was upset that Reid removed the biodiesel tax credit from the bill. The Des Moines Register reported,

Harkin said he was also disappointed Reid’s package did not include an extension of unemployment insurance or health care benefits for the unemployed.

“These immediate critical needs must be met without additional unneeded tax giveaways to the very wealthy, which create no new jobs,” Harkin said in a statement. “We can do better than that for the millions of Americans who have lost their jobs.”

Additional spending on unemployment benefits has much more stimulus “bang for the buck” than any form of tax cuts, because unemployed people are very likely to spend whatever extra benefits they receive.

The Register noted that Reid’s bill “would allow state and local governments to receive a federal subsidy for a portion of the interest paid on bonds that finance public works projects.” That could help Iowa repay debt from the I-JOBS infrastructure bonding program approved last year.

Democratic candidate Roxanne Conlin released the following statement on this bill:

“Senator Grassley’s so-called ‘jobs bill’ is just more of the same from Washington – a pork-laden handout to special interests.   This would do little to create jobs.  Why does a so-called “jobs” bill handout tax giveaways to satellite tv corporations? Maybe it’s because the communications industry has given Grassley $144,000 in campaign contributions.  We must end these sweetheart deals for special interests and that’s why I’m fighting to fix it.”