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January 7, 2014

Obama Logic: 'Paying People Not to Work (Somehow) Creates Jobs'

Topics: Political News and commentaries

According to Barack Obama, paying people not to work somehow "creates jobs," a point he made today while being flanked by unemployed Americans.

Obama's logic is, of course,complete bullsh*t:

Reinstating emergency unemployment benefits, as U.S. President Barack Obama urges, would slow growth and impose unconscionable burdens on the working poor.

State governments provide a basic benefit averaging $300 per week for 26 weeks. During the Great Recession, Washington-financed additional benefits for as long as 99 weeks.

With the recovery in its 55th month, the emergency is over. Another extension would make long-term benefits de facto permanent and create another entitlement. Republican leaders are correct to insist Democrats identify equivalent spending cuts or new sources of revenue.

Advocates argue those benefits provide the strongest economic stimulus because the unemployed spend whatever money they receive on necessities. However, their supporting studies assume other federal programs aren't cut or taxes aren't raised to finance benefits.

Cutting other outlays, for example on roads and schools, would have an even bigger negative effect on gross domestic product and jobs than failing to again extend unemployment benefits, because some of the latter wouldn't be spent but rather be used to pay down credit cards and other debt.

Additional taxes to pay for more unemployment benefits would impose a terrible burden on the working poor -- the very folks Obama constantly reminds need the most help.

Unemployment benefits are financed by federal and state payroll taxes, which like the Social Security tax, cut off when a worker's wages exceed a cap established by the various states, according to federal guidelines. The average limit is about $12,000.

Although these taxes are generally paid by employers, economists argue those reduce the wages employers can pay low-income workers by a similar amount. Indeed, some of the extended unemployment benefits paid during the recession were financed by a special federal levy that hit low-income workers hardest of all, making extended benefits a cruel hoax on the working poor.

Unduly long unemployment benefits in an economy the president says is picking up steam encourages many unemployed to postpone serious employment searches. From Wall Street to Main Street, white collar professionals have delayed accepting lower pay and changing occupations by running down savings and collecting maximum unemployment benefits of about $300 a week.

Most could easily earn multiples of those amounts even by accepting positions at somewhat lower status than their old jobs. It takes a rather twisted view of social justice to raise taxes on the working poor to pay professionals not to work but that is exactly what federally financed extended unemployment benefits do.

A recent study by the non-partisan National Bureau of Economic Research indicates extended unemployment benefits caused most of the persistently high unemployment after the Great Recession.

More here ...

As Katie Pavlich points out in her piece titled 'The Dishonesty of Democrats' Push for an Extension of Unemployment Benefits', for months, in an effort to shift focus away from Obamacare, Democrats have argued that the economy is recovering and that jobs are being created. But if this is the truth, then why is it necessary to continue the extension of unemployment benefits?:

Here's an inconvenient fact: 9.5 million people have left the work force since President Obama took office in 2009, meaning millions of people haven't seen their jobs come back and therefore, they've given up looking. In addition, the labor participation rate is at it's lowest since 1978.

And here's some more info from CNN about the jobs President Obama has taken credit for "creating" during the 2012 presidential campaign.

The Bureau of Labor Statistics confirms that a lot of jobs have been created under Obama's leadership -- 4.4 million by the bureau's latest count. What Obama did not say, however, was that the nation shed 4.3 million jobs during the early days of his term, and that the net gain since he took the oath of office in January 2009 is just 125,000 jobs.
As Pavlich goes on to point out, Republicans aren't against unemployment insurance, but they are making a valid argument that the continued extension of these benefits actually does harm to the unemployed by keeping them out of the job search. CNBC backs up this assertion.

On the other hand, Dem strategist Doug Schoen, a supporter of extending the benefits and a believer in the pseudo hocus pocus that benefits creates employment, offers up an excellent suggestion for Obama and both sides of the aisle in Congress: "Extend Unemployment Benefits For 3 Months, And Make A Deal":

As Congress went home on December 28th on break, 1.3 million Americans lost their jobless benefits. But 1.3 million people is just the beginning if Congress doesn’t pass a bipartisan bill to extend unemployment insurance for the next three months -- over 14 million Americans will suffer in the next year.

This is surely something to be avoided -- no matter ones political affiliation.

President Obama argued that the Republican stance that giving unemployment benefits will sap Americans' motivation to seek work is totally wrong headed and I am inclined to agree.

That said, it is also important to note that Obama's stance that he has "never met an American who would rather have an unemployment check than the pride of having a job" has been shown to be untrue: those seeking benefits has grown exponentially during his time in office. There is certainly an argument to be made for Americans recklessly abusing our benefits system, but there are also genuine job seekers to consider in the extension of unemployment benefits.

As for my own take, it lies between Pavlich's and Schoen's points of view (and agrees with Krauthammer): Extend the benefits for 3 months in exchange for a long-term deal that makes it clear that unemployment insurance is not an entitlement, but a way to help people get to a point at which they help themselves.

Posted by Richard at January 7, 2014 4:28 PM

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