King Banaian on Senator Franken's proposal to use $5 billion of TARP moneys to help boost jobs creation:
It's not completely horrible, though. I did some reading on the research regarding wage subsidies, and at least one recent study seems to find some positive effects of it. Maybe they're not very large. It appears the best results come from Germany. What we don't know is whether the money could be better spent elsewhere, says Paul Walker. Nor do we know why the Congress seems to continue to think TARP repayments are a windfall.
Basic labor theory tells us a profit-maximizing employer will hire a person if the salary he has to pay the person is no more than the person's marginal revenue product. It could be that businesses in general don't have the funds to take employment risks, in which case a subsidy could work. But it's also possible that businesses don't see general demand conditions improving in the near future, something that would render subsidies an impotent stimulant.