Wednesday, July 21, 2010

Looks Like We'll Be Getting More Unemployment

Thanks to the vote of deceased West Virginia Senator Robert Byrd's replacement, and the Senate's two stealth Democrats, Snowe and Collins, both of Maine, the Senate proceeded to end debate about extending unemployment benefits for the eighth time. The $34B price of this benefit will, once again, be furnished by borrowing, rather than cutting other government expenses or discretionary spending.

As Art Laffer wrote recently in the Wall Street Journal,

"On the face of it, the idea that higher unemployment benefits won't lead to more unemployment doesn't make much sense."

Here's what yesterday's lead Journal staff editorial had to say on the topic,

"In the immediate policy case, Democrats are going so far as to subsidize more unemployment. If you subsidize something, you get more of it. So if you pay people not to work, they often decide . . . not to work. Or at least to delay looking or decline a less than perfect job offer, holding out for something else that may or may not materialize.

The economic consensus—which includes Obama Administration economists in their previous lives—couldn't be clearer on this. In a 1990 study for the National Bureau of Economic Research, labor economist Lawrence Katz found that "The results indicate that a one week increase in potential benefit duration increases the average duration of the unemployment spells of UI recipients by 0.16 to 0.20 weeks." "

To highlight the failure of the current administration's economic efforts to facilitate the creation of, or directly create jobs, the same editorial opened with this scathing passage,

"Presidents typically invite Americans to appear at Rose Garden press conferences to trumpet their policy successes, but yesterday we saw what may have been a first. President Obama introduced three Americans—an auto worker, a fitness center employee and a woman in real estate—who've been out of work so long they underscore the failure of his economic program. Where are his spinmeisters when he really needs them?"

I don't think anyone with any common sense really believes that extending unemployment benefits has anything to do with job creation, do you?

But, thanks to the Senate, we're going to actually see more unemployment, as the federal government votes to pay people more and longer not to work.

How's that for sensible economics? And with money borrowed in your name.

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