Editor's note: Samuel Sherraden is a policy analyst for the Economic Growth Program at the New America Foundation, a Washington-based think tank that promotes innovative thought across the ideological spectrum.
Washington (CNN) -- Congress has stripped the jobs bill of the reinvestment in America's infrastructure that would put people back to work and make the country more prosperous in the long run.
Instead, the bill relies on tax credits that are too small and too temporary to make a dent in America's high unemployment.
The House of Representatives passed a relatively strong bill in December, which included $48 billion in infrastructure spending. Now the House and the Senate have adopted a bill that consists primarily of a payroll tax deduction for employers who make new hires and keep them on for a year. The original House jobs bill was $154 billion. The new bill is one-tenth the size.
The tax credits in the bill are too small to give employers a real incentive to make new hires. Economists Timothy Bartik and John Bishop are major advocates of many job-creation tax credit proposals and estimate that the tax credit in the Senate bill will create around 200,000 jobs.
This is a drop in the bucket compared with the 8.4 million jobs lost since the beginning of the recession. Bartik argues that for many employers, the 6.2 percent tax credit "will be too small to change employer hiring behavior."
The bill is also too temporary. The 6.2 percent tax credit for new hires is only good for the rest of 2010, and the $1,000 bonus for retention of qualified hires provides only a one-year incentive. But a one-year tax credit is based on the flawed assumption that the job market will improve dramatically in 2011.
The outcome could be similar to the "Cash for Clunkers" program, which caused an initial surge in auto sales, but led to a plunge in auto purchases when government incentives ran out.
It is unwise to pass a temporary hiring incentive that will expire during a year when the unemployment rate is forecast by the Congressional Budget Office to average 9.5 percent.
Lastly, tax credits are not the best job creation measure.
The best way to create good jobs is to rebuild America's dilapidated infrastructure. As Republican Gov. Arnold Schwarzenegger and Democratic Gov. Edward Rendell have said, infrastructure is the key to job creation in the short and medium term and our prosperity in the longer term.
According to a recent study by the Milken Institute, every $1 billion in infrastructure investments will create 25,000 jobs. By these estimates, an infrastructure package of $300 billion would create 7.5 million jobs, far surpassing the Senate's tax credit in terms of number of jobs created for the buck.
Infrastructure would also deliver far greater benefits to the economy as a whole.
With American consumers constrained by high household debt levels and with businesses needing to work off overcapacity in many sectors, we need a new, big source of economic growth that can replace personal consumption as the main driver of private investment and job creation.
Infrastructure is the most promising source of growth, given the pent-up demand for improvements in roads, bridges, broadband networks, air traffic control systems and a new energy grid, among other things.
New infrastructure investment can easily be financed at historically low interest rates through a number of mechanisms, including the expansion of Build America Bonds and Recovery Zone bonds (tax-credit bonds that are subsidized by favorable federal tax treatment) and the establishment of a National Infrastructure Bank.
These investments will put Americans back to work in good, high-paying job. It will pay dividends back to the economy through increased productivity and stronger growth. The job creation tax credit stands little chance of delivering the job creation or economic growth that a sustained program of infrastructure investment can provide.
The opinions expressed in this commentary are solely those of Samuel Sherraden.