Monday, December 30, 2013

Ending Extended Unemployment Benefits Was the Right Thing to Do

Expressing Outrage at cutting off unemployment benefits, which takes effect in January after Congress's budget deal, a letter stated in the New Jersey Star-Ledger:


    How did we reach this point where so many are unemployed long-term and might now lose their benefits?
    First, the federal government deregulates the financial industry, leading to proliferation of risky mortgages, which are packaged and sold as investments rated high quality by rating agencies paid by the very companies selling them. This drives home prices up and up and the bubble inevitably bursts, destroying billions in home values and producing this Great Recession.
    Our economy has never produced enough jobs for all the job-seekers, but now the shortfall is enormous. The U.S. Bureau of Labor Statistics reports that fewer than 4 million job openings existed in a recent month, while there were nearly 12 million people looking for work.
    That doesn’t include the discouraged people dropping out of the labor force.
    Nevertheless, members of Congress, including Sen. Rand Paul (R-Ky.), say the unemployed just need to get jobs, failing to recognize that this economy Congress helped create will always have millions unemployed because there simply aren’t enough.
    Now, that same Congress wants to cut off benefits to those who are unemployed as a direct result of the government’s misguided actions.
Tony Giordano, Howell

I left these comments:

There are multiple falsehoods in this letter.

First, the financial industry wasn't deregulated. In fact, financial regulations increased by 29% under G.W. Bush. [Correction; 23%]

Second, the packaging of "risky" mortgages into investment vehicles did not cause the housing bubble and bust. The easy-money Federal Reserve policies and subsequent sharp "tightening" did, as any basic economics text will tell you.

Third, the statement "Our economy has never produced enough jobs for all the job-seekers" is utterly false. As recently as the 1980s and 1990s, labor shortages were so acute that fast food restaurants were offering twice the minimum wage to attract workers. Higher-skilled occupations faced even larger shortages (and still do today). Throughout history, a healthy economy has always produced more jobs than job-seekers. During the 19th Century, jobs were generally plentiful despite the flood of immigrants entering the country. Even today, states with healthy economies, like the energy boom state North Dakota, have plenty of jobs for anyone willing to work. Jobs are always plentiful as long as government masterminds keep regulations and taxes reigned in, because there are always plenty of people willing to start businesses.

Congress did the right thing ending unemployment benefits for the so-called "long-term unemployed." Seizing money from working people in order to pay people not to work is simply wrong. Want more jobs [?], reign in government regulations, taxes, and spending, stop demonizing businessmen, stop subsidizing unemployment, and we'll once again be lamenting worker shortages, like in the 80s and 90s.

Giordano is right about one thing, but not in the way he means. The sad state of the economy certainly is "a direct result of the government’s misguided actions."

Related Reading:

Washington Budget Debacle Highlights Extent of Our Dependence on Government

1 comment:

Mike Kevitt said...

Is Giordano close to right when he says there are 4M. jobs for 12M. people? If so, then lowering taxes, regulations, spending, etc. ought to clear the field enough to enable creation of at least 8M more jobs for those 12M. people.

Some of the present 4M. jobs require qualifications that none of the 12M. people have. So, more than 8M. new jobs are needed, requiring only the skills these people have. They could then fill those jobs and many of them could then start upgrading their skills and get those better jobs sitting out there. That would open up the bottom end for those coming out of school looking for full-time work.

Get government confined to its proper function, and things would fall into place.