There’s an old saying that the definition of insanity is continuing to do the same things while hoping for a different result. For those of us that are hardheads, and I’m certainly including myself, bad habits die hard; however, when it comes to wasteful and damaging government policies, should it really be that hard to cut the ties? If the Obama Administration’s affinity for a European-style unemployment program is any indicator, official Washington is struggling with a case of the thick skull. New research conducted by Harvard economist Robert Barro indicates that the currently 99 week unemployment benefit is actually subsidizing joblessness in this country.
One of the deepest recessions, and highest joblessness rates, in the post-World War II era occurred in the fall of 1982. The lingering effects of the Carter Administration’s disastrous policies of economic intervention, price controls and printing of money caught up with America in the 2nd year of the Reagan Presidency. The inflationary cycle set-off by Carter’s fiscal policies culminated in a devastating economic downturn in the fourth quarter of fiscal year 1982, resulting in peak, and record, unemployment of 10.8% in November and December of that year. Though that recession was step, the average number of weeks a person drew unemployment never surpassed 21 weeks. Contrast that with the current economic doldrums our nation is struggling to escape; we have structural unemployment where nearly 40% of the unemployed have drawn unemployment benefits for over 26 weeks. This empirical data suggests that the continual extension of unemployment benefits, which now span nearly two years, is undermining the incentive unemployed Americans have to seek work.
The Federal government is now, without question, subsidizing structural unemployment in our economy, which results in even higher job losses due to companies’ grappling with soaring unemployment insurance premiums. According to Mr. Brasso of Harvard, the currently 9.5% national unemployment figure would look at lot more like 6.8% if we brought unemployment benefits back down to reality. The Administration would do well to ask for a reduction in the number of weeks a person is eligible to receive unemployment benefits during the President’s address to Congress next Thursday. If Obama’s history is any indicator, however, he will likely propose just the opposite. For a President that keeps claiming he’s focused on job creation, the only job he seems focused on is his own.
We need to remove the barriers to economic growth in this country. That is exactly what President Ronald Reagan did in response to the disastrous policies of Jimmy Carter. Reagan reduced regulation, cut taxes, removed price controls and refused to extend unemployment benefits. The result was an economic recession that, relatively quickly, turned into one of the largest peacetime economic expansions in our nation’s history. The next President will have to follow Reagan’s model of unleashing capitalism in America again; it would certainly be fitting, given that the current occupant of the White House seems determined to be Carter 2.0.
Source Article: http://www.realclearpolitics.com/2010/08/30/the_folly_of_subsidizing_unemployment_240603.html