Right now the Obama administration is floating a "trial balloon" by purposely leaking a plan to temporarily cut the payroll tax paid by employers. As this is a leak, not a full plan, it's unclear how much will be cut or how long it will last but likely it will be a 2-7.65% cut for 1 or 2 years. While this is a better idea than further infrastructure spending, I'm worried it is also doomed to failure. My big problem with it is the temporary nature of the cut. Most businesses are not just looking for temporary labor (unless they are summer camps and theme parks) but employees who will stay with the company for years so they can soak up and build up the organizational knowledge that has accrued over the years. Sure, it's a good thing if the cost of having an employee is cheaper in 2011 and 2012 and maybe 2013, but what about after that?
Also, besides pay, there is another variable which has companies worried about adding to their current employee count, benefits. My company's health insurance premiums went up almost 30% in 2011 compared to 2010 thanks to the new Obamacare regulations about pre-existing conditions and allowing 26 year olds to be on their parents insurance. In talking to other people, not just in my area but around the country, it seems that premiums have increased by between 25-50% compared to a year ago. Come January 1, 2012, there will likely be another increase. Considering that in many cases, the cost of insurance can be 25% or more of gross pay, another increase of 25-50% could prove disastrous for many companies. And who knows what will happen in 2013 and beyond with healthcare costs and all the regulations Obamacare will be throwing down for businesses that offer insurance (no wonder McKinsey predicts that 30% of businesses might be incentivized by Obamacare to dump their health insurance). This huge unknown is a major reason many businesses aren't hiring and it is not going to go away through a temporary cut in payroll taxes.
Another issue is more long term but just as important. Medicare is supposed to go bankrupt in 2024 and Social Security in 2036, is raiding the funding mechanism for these programs such a great idea? Won't it just accelerate the bankruptcy date? It's amazing how often Obama wants to drink from the Medicare well, first he used cuts in Medicare to fund Obamacare, now he is once again raiding its funding mechanism. That doesn't seem very responsible. And God forbid he actually reform social security and medicare to make them sustainable.