Sunday, December 9, 2012

Is it charity or economics?

Yesterday's AP article titled End of Jobless Benefit Extension 'the Real Cliff' estimates that 2.1 million people will lose their unemployment benefits this December 29th, and 1 million more during the ensuing 3 months. And that the cost of extending unemployment benefits has been $520 billion since 2008.

I'd say it's a pretty safe bet that we'll see benefits extended yet further under whatever compromise the two sides hammer out --- the Democrats have been vocal on the issue, the Republicans have been mute.

Senator Jack Reed, Democrat from Rhode Island, says "this is the real cliff" and insists that another extension of benefits must be part of any deal. He's concerned with the plight of the unemployed: "Many of these people are struggling to pay mortgages, to provide education for their children."

The Congressional Budget Office says that extending unemployment benefits another year would create 300,000 jobs (oh the certainty). The average benefit of about $300 a week tends to get spent quickly for food, rent and other basic necessities, their report said, stimulating the economy.

So what is it? What inspires the push to extend benefits to the long-term unemployed? Is it charity? Or is it economics?

If it's charity, so be it. We understand that when we provide an unemployed family with money we're providing life's basic needs. We do it because we care, regardless of the cost.

If it's economics --- if it's about growing jobs --- well, that's a whole different proposition altogether. It's no small stretch to accept the notion that by extracting resources from job producers and distributing them to the jobless we somehow create jobs. Essentially, the politician is saying "look job producers, we don't like how you're investing your resources, we want you to start hiring people. So here's what we're going to do; we're going to raise your taxes --- we're going to curtail whatever long-term aspirations you may have had for that capital --- and distribute it in a fashion that will provide short-term economic stimulus to the point where you'll be forced to bring on more workers just to meet the demand for the same old stuff you produce. Of course if the economy were better, we wouldn't have to do it."

In essence, Washington --- the Washington that spends a trillion-plus more than its income --- knows better how to allocate resources than does the private sector.

Clearly, the economic logic rests on very shaky ground.

So then, it has to be charity. But, seriously, wouldn't we better help the unemployed by leaving resources with employers? I mean heaping burdensome regulations, higher taxes, and mandated healthcare onto the producers of employment at a time when we're after more employment seems a bit crazy, don't you think? But of course that begs the question, without raising taxes, how do we extend unemployment benefits? The answer is, we wouldn't have to.

1 comment:

  1. Your Comments

    Your last comment is exactly my thinking.
    They use bandages with a pretty pix on it instead of going to the main cause.