Extending unemployment biggest boost to economy? Really?

With the failure of the “stimulus” package and unemployment hovering near 10% for almost 16 months, congressional democrats, statist pundits and our dear comrade leader are changing their message. According to Joe “Smartass” Biden the “stimulus” has worked but the regime just hasn’t been able to convince us stupid Americans of this. Now with the biggest tax increase in history on the horizon (if the Bush tax cuts are allowed to expire), the regime has cut a deal with congressional republicans to extend the tax rates for 2 years in exchange for a one year extension of unemployment benefits (more here).

To overcome the opposition of fiscal hawks to adding another $56B to the deficit, the regime has taken a new position – unemployment is actually a boost to the economy (story here from the American Thinker).Wait, WHAT?? So does this mean that we need more unemployment to recover the economy? Really?

President Obama, Nancy Pelosi, Joe Biden, Rachel Maddow, various economists dependent on government funding, and other die-hard Keynesians all proclaim that unemployment-compensation payments promote economic growth. Just yesterday, President Obama told Tampa station WFLA:

“It’s probably the biggest boost that we can give an economy because those folks are most likely to spend the money with businesses, and that gives them customers.”

In July, Speaker Pelosi (D-CA) said of this measure:

“It injects demand into the economy, and is job creating. It creates jobs faster than almost any other initiative you can name…”

Earlier this month, she repeated this mantra adding that unemployment benefits help “reduce the deficit” and that “history shows” tax cuts do not create jobs.

It is no wonder these ‘friendly fascists’ ardently defend these expenditures to the extent they do, considering that the number of unemployment-check recipients has quadrupled since Rep. Pelosi was sworn in as Speaker of the House. And since that date — January 4, 2007 — the unemployment rate has more than doubled and our national debt has ballooned by 59.6%.

Unemployment compensation falls in the realm of government-administered anti-poverty programs. While most people generally support the idea of this “safety net”, the details — how it’s funded, who qualifies, for how long, for how much, and other terms — are points of difference. Unemployment benefits are transfer payments, where government takes from A and gives to B. Transfer payments, whether constitutional or not, are a cornerstone of Obamanomics and currently comprise over two-thirds of all federal outlays.

In touting the macroeconomic benefits of unemployment compensation payments, Obama, Pelosi, et al. display ignorance regarding — or, at least, discount the importance of — production, the process of converting factors of production (inputs) into goods and services (outputs). Instead, their focus is misplaced on consumption and finding ways to increase our desire to consume. They act (and legislate) as if employment has no connection to production.

Just a reminder: these economic idiots have never held a real job in their entire lives. They have never run a business or managed a payroll. To think that government taking from working people and giving to non-working people is somehow an economic stimulus is not only specious, but downright dangerous.

Fundamentally, President Obama, Speaker Pelosi and their ilk fail to understand wealth and how it is created. Our well-being depends on wealth. Wealth, as Mr. Tamny wrote, “results from the matching of good ideas and hard work with capital.” Capital comes from savings. Savings come from delayed consumption. The more government extracts from the private sector, the less we have to save, invest, spend, or donate. And, not incidentally, improvident spenders are more likely than penny pinchers to end up on the government dole. Redistribution of wealth via transfer payments, per Mr. Tamny, “fosters no new production, and with that, no subsequent demand.”

The policies to promote maximization of production are no mystery. It’s pretty straight-forward, really, if this government would quit meddling in markets and bashing business and focus instead on essential services, the safeguarding of production and private property being among them. On this, Peter Ferrara at American Spectator recently wrote:

“What actually drives economic recovery and growth is increased production, which results from increased incentives to produce, and reduced costs burdening production. That involves reduced tax rates, which allow producers to keep a higher percentage of what they produce. It also involves reduced regulatory costs and reduced costs of government spending…But Obama refuses to consider any of this because it involves reducing rather than expanding the power of government, and he is rigidly opposed to that ideologically… This doesn’t mean we should not extend unemployment benefits. It just shows that Obama and the Democrats have no understanding of how to promote economic growth and recovery.”

On one of Mr. Ferrara’s excellent points above, tax rates, it should be noted that the U.S. imposes “the second-highest overall corporate rate among industrialized countries.” Lowering taxes rates-permanently, not temporarily–on American businesses and income earners (read: wealth producers) would be a good place to start down the road to higher production and employment.

Left unmentioned in the article is the disastrous impact of extending unemployment benefits on state budgets (more here and here).


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