Market Talk

At some point this number will matter.

US stocks rising yet again, following yesterday’s gains, as President Obama signs new health-care legislation into law.

Positive reaction to the passing of the health bill is a bit perplexing, especially since many expected health care to act as a drag to the market’s yearlong rally.

But as we noted yesterday, it looks like there could be several benefactors from the legislation, ranging from hospital operators and pharmacy-benefit managers to drug and medical-device makers. And the final vote has added some much-needed closure to the situation, which seems to please investors.

But the ballooning federal budget deficit isn’t lost on some, and this $940 billion piece of legislation has Harvard economist Greg Mankiw worried about future implications:

In addition, I could not help but fear that the legislation will add to the fiscal burden we are leaving to future generations. Some economists (such as my Harvard colleague David Cutler) think there are great cost savings in the bill. I hope he is right, but I am skeptical. Some people say the Congressional Budget Office gave the legislation a clean bill of health regarding its fiscal impact. I believe that is completely wrong, for several reasons (click here, here, and here). My judgment is that this health bill adds significantly to our long-term fiscal problems.

Nevertheless, the stock market keeps puttering along. DJIA’s up 44 at 10830, while S&P 500′s up 2 to 1168.

“I don’t read this market rise as an endorsement of expanding federal indebtedness, but rather a vote of support for the functionality of government,” John Curran writes at Time’s Curious Capitalist blog.

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Please pass the tax credit, it's our only hope!

The September jobs report was a perfect reminder that the labor front continues to get worse before it gets better. And with no drivers for job growth on the horizon, the government may look to take matters into its own hands.

NYT reports the government may reward companies in the form of tax credits for creating new jobs. It’s an idea that hasn’t been tried since the 1970s, but it’s increasingly gaining support – especially as the unemployment rate approaches the double-digit rate. The goal is to help jobless folks find work as well as encourage small-business development.

The Times has the details:

One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.

“It’s beautiful if it can be timed at a dire moment like this, when unemployment is way too high and appears to be going somewhat higher,” said Mr. Phelps, an economics professor at Columbia, lamenting that the president dropped it from the $787 billion stimulus plan approved in February. “But it’s a pity that this wasn’t done a year ago.”

The Times says the proposal has some bipartisan appeal , which is definitely much-needed as its hard to find a sector of the economy that will fuel job growth in the near future.

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