Paying the Unemployed Does Not Stimulate an Economy
Many in Congress as well as the President and some of his economic advisers have argued that extending the period for paying the unemployed will stimulate the U.S. economy out of its sluggish performance. Would any of them consider as valid an argument that giving money out of their own pockets to an unemployed member of their household would promote the financial prosperity of that household? Would they not correctly see such financial contribution as merely a transfer within the household? Would they also not be eager to nudge the unemployed to get up quickly and find a job?
So why don’t they apply the same logic to the economy as a whole? The only tenable answer is that they are under the spell of the economic miseducation inflicted on the minds of economists and many among the general population by John Maynard Keynes. They believe that consumer spending drives the economy, without having stopped to consider from where consumers get the means to spend.
Consumption Doesn’t Need Stimulation
On their own—that is, in the absence of government handouts in the form of welfare payments or unemployment compensation (funded by taxpayer money)—people acquire the means to spend by earning income from producing and selling goods and services or directly selling their labor services. If they borrowed the money to spend, it must be from someone else who has earned income from production. And as Adam Smith long ago noted in The Wealth of Nations, “[C]onsumption is the sole end and purpose of all production. . . . The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it.”
Why else does anyone work other than to acquire the means to purchase goods and services? That is why consumption spending does not need stimulating. What we currently save out of our incomes is to enable us to smooth out our consumption spending over time or to acquire the means to increase consumption and/or our income-earning capacity in the future.
Such household investments may take the form of bank accounts or bonds to earn interest income, stocks to earn dividends, or educational skills to earn higher future wages and salaries. The only part of our unconsumed income that we do not devote to increasing our future capacity for increased consumption spending is cash hoarding; cash does not earn interest or dividends. But in normal times, when we are not too scared to keep our savings in bank accounts or to purchase stocks or bonds, cash hoarding constitutes a very minor part of our unconsumed income. Meanwhile, what we save is spent by borrowers of our savings, mostly producers of goods and services.
On the basis of these fundamental truths about how people manage their financial affairs and drawing on the wisdom of Adam Smith, Jean-Baptiste Say constructed the thesis now named after him, Say’s Law of Markets, in his 1803 Treatise on Political Economy. It is from production that people earn incomes to purchase those goods and services they themselves don’t produce:
Since the time of Adam Smith, political economists have agreed that we do not in reality buy the objects we consume, with the money or circulating coin which we pay for them. We must in the first place have [acquired] this money itself by the sale of productions of our own. . . . It is then in strict reality with their productions that [people] make their purchases; it is impossible for them to buy any articles whatever to a greater amount than that which they have produced either by themselves, or by means of their capitals and lands.
The law simply says that “productions can only be purchased by productions” (Say, Letters to Malthus, 1821).
Regarding the need for savings rather than consumption spending to promote economic growth, Say noted that:
The public interest is . . . not served by consumption, but it is served and served prodigiously by saving, and though it seems extraordinary to many persons, not being any the less true as a consequence, the labouring class is served by it more than anyone else. These persons think, perhaps, that the values which the wealthy save out of outlays on their personal pleasures in order to add to their capitals are not consumed [spent]. They are consumed; they furnish markets for many producers; but they are consumed reproductively and furnish markets for the useful goods that are capable of engendering still others, instead of being evaporated in frivolous consumption.
Failing to understand all this, Keynes made a fetish of consumption spending as the engine that drives an economy during the 1930s, especially in his famous book The General Theory of Employment, Interest, and Money (1936). He argued that Say’s Law applies only to an economy in which there is no unemployment or one in which money is not used as a means of exchange. Neither claim is true. However, many an economist has been hooked on Keynes’s miseducation ever since. In macro models legislated unemployment compensation is listed among “automatic stabilizers.” The thinking is that paying the unemployed so they would keep spending will sustain the economy’s so-called aggregate demand. Even if proponents of that view recognized that the government would have to pay the unemployed from its tax revenue (or borrowed funds), they still do not realize that total spending would not change. But unless the government borrowed the additional funds from outside the domestic economy, what it takes from purchasers of its bonds will not be available for private borrowers to spend on investment projects or for their own consumption. Put differently, variations in the level of government spending, besides the portion funded by external borrowing, do not change total spending in the domestic economy.
The Need for New Production
As for stimulating economic activity, it is not the level of consumer spending but new directions in production that make the difference. Entrepreneurs conceiving of new ways to meet economic necessities or desires in the marketplace create new incomes with their positive ripple effects in the economy. Meeting such needs requires that entrepreneurs find the savings, or loanable funds, to acquire the resources to engage in production. Of course, followers of Keynes’s mistaken 1937 view—“The investment market can become congested through the shortage of cash. It can never become congested through the shortage of saving. This is the most fundamental of my conclusions within this field”—do not recognize the necessity of savings to fund investment expenditures. But the fact is that the government’s taxing the employed or borrowing the community’s savings to pay people who are unemployed does not help entrepreneurs in their socially useful task of new wealth creation. This is also how we should recognize the failure of the $787 billion so-called stimulus of February 2009, the subsequent Cash for Clunkers program, and the first-time home purchasers’ subsidies of 2010 to stimulate economic recovery. The money to fund such programs has to be taken from the economy: There is no injection of new money by the government; it effects only a transfer.
Specialization and Trade
Adam Smith in The Wealth of Nations made the salient point: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” The prudence is in the fact that households typically do not aim to be their own tailors, shoemakers, wine makers, homebuilders, or producers of all the numerous things they need, but rather specialize in those things they can produce at the cheapest cost and buy the others in the marketplace—the advantage of specialization and trade. That’s how Smith came to urge nations to adopt the wisdom of households in the management of their production and consumption activities and to reject mercantilist restrictions on trade and opt for free trade instead.
We can apply the same wisdom of households to the question of paying the unemployed. Just as no household would expect that giving money to any of its members to spend would stimulate wealth creation for the household, so it is for the economy as a whole. An economy is little more than the collective activities of households. It is ultimately the aggregation of household production and consumption expenditures that is called gross domestic product, GDP.
We also can learn from the experience of Europe. Its greater “generosity” in unemployment compensation does not produce less unemployment and greater economic growth but higher levels of unemployment and relatively poorer economic growth than in the United States. Extending the period of unemployment insurance compensation only assures that the unemployment rate stays permanently higher than the 4 to 7 percent range within which it fluctuated over the last 20 years or so until 2009. Arguing about the ballooning deficit may help stop the extensions, but that really is a side issue. The real point is that paying people who are unemployed simply discourages them from seeking and/or accepting alternative job offers quickly. And such payments do not change total spending in the economy.
It is truly a pity that followers of Keynes’s mistaken understanding of how a monetary economy works now claim the relevance of his ideas to our current economic situation and are implementing some of his misconceived policies.
Comment by Jonathan Campbell on 24 November 2010:
What you do not realize is that unemployment insurance (and its extension in bad economic times), while not an “inherent” stimulus of the economy, is needed now because there are 30+ million unemployed or underemployed, 4 MILLION people are collecting UI benefits, only 1 million jobs available, and most of the jobs are mismatched to the skills of the unemployed. The people I’m talking about, who are currently collecting UI, will likely lose their productive roots in the economy – they will lose their homes or apartments or at the very least will be dislocated (moving in with relatives, etc). Some may even turn to crime out of desperation. The dislocation of this “recession” cannot be underestimated. Whether you are right, left, or libertarian, it makes no sense to have 4 more million people drop into the permanent hole of homelessness.
Comment by James Madison Fan on 24 November 2010:
Jonathan,
They have my sympathy but why should I pay for it? 1 dollar out of every 3 I earn goes to the government and most of that goes to supporting some sort of entitlement program like Social Security or Welfare or Medical/Medicaid or HUD or CalFresh (food stamps) and the list goes on and on.
In addition to this we have a foreign aid program called “Illegal Immigration” so businesses can get workers to fill jobs “Americans won’t do” per Baby Bush. The thing our beloved ex-pres left out is “… for the pathetic wage being offered.” Even using PEW’s numbers we have around 15 million illegal aliens in the US that are either doing jobs they shouldn’t be doing or using government programs they shouldn’t be using. That would cut the number of “99er’s” in half. I don’t mind carrying around a fellow citizen on my back for a coupl
e of months but when the Loony Left asks me to carry around a couple million foreign nationals so the Wing Nuts can get cheap labor it tends to make people cranky.
Comment by Jonathan Campbell on 24 November 2010:
OK, fine, but this is a social cost for the entire society. We are not islands. Either we (everyone) pays for it in taxes, or the corporations pay for it in corporate taxes. There are no other sources of income. The fact is that we will are quickly becoming a banana republic as a result of the actions of the multinational corporations, who moved their factories to where labor could be had for $1 a day and there is no safety net. Impoverishment here is becoming the norm. Note I said 30+ million adults are unemployed or underemployed (that is, working part time, not earning a full living). That is about 17% of the workforce (and some economists say that the number is more like 20%). As a society, do we let these people starve? Become another India or South Africa, with people dying in the streets? Sorry, that is not the United States that I know, the United States that pulled together in the 1930s to prevent widescale poverty, that established Social Security and welfare and unemployment insurance. With Freedom comes Responsibility to the entire society.
Comment by Jonathan Campbell on 24 November 2010:
I might add: the “illegals” come here as a result of the agribusiness multinationals, who undermined the farms to our south with cheap subsidized grain. When these farmers fled to the cities, they found factories paying $2 or $3 per day, not enough to feed their families, so the next step was to make the dangerous trek to the US in hope to find enough to live on. We as a society OWE THEM THE RIGHT TO STAY HERE because our great corporations created the conditions for their emigration here. Believe me, they would rather live back home, but there is nothing for them there anymore. What goes around comes around, and it is here.
Besides, these workers really do jobs that most US citizens do not have the stamina to perform. It is backbreaking work, mostly paid at much less than minimum wage. So, you are saying, the flight of the multinational company factories and now outsourcing of engineering, quality assurance, customer service, drafting, graphic design, means that the 30+ million people who used to do these things should now become lower-than-minimum-wage workers in the fields. How nice of you to offer this great benefit to them! Sorry, I don’t buy it. The answer is re-industrialization of the US, and, if needed, industrial protection to keep out cheap imports made for a dollar a day.
Comment by Dale on 24 November 2010:
I totally understand why people get upset about the government paying unemployement. However I have spent my whole life working and paying into the government. 1 out of every 3 dollars I earned as someone else put it. I got laid off in Oct 2007 after 19 years in the printing industry. Why, because printers are no longer needed in the United States. If it isn’t time sensitive it can be printed in a forign country for 1/5 of what it would cost here. just like most other production jobs. I got a job as a truck driver. I worked hard and showed up to work on time and was just as responsible as the previous 19 years. June of this year I got laid off again!
Our government passed trade agreements with other countries and LIED to it citizens telling them it would be good for our country. We would get better jobs and be better off. It was all BS. They stole our jobs. Is it my responsibility to live on the street just like millions of other people who cannot find a job after being laid off? I went from $70,000 per year to $28,000 per year. thanks to greedy assholes both Republican and Democrat in Washington D.C. making decisions that they would try to make me believe are in my best interest when they are sleeping with the the banksters and corporate executives. We have not had so many unemployeed people since the Great Depression of the late 1920′s and at the same time corperations are raking in record profits as our polititions do thier bidding.
If you do not want to pay someone elses unemployement than it is time to stand up to the out of control juggernaut we call the federal government. Quit accepting thier laws, thier rules, thier wars and thier self serving trade agreements. Some day soon it may be you who just got his last unemployement check and still cannot find a job. It’s a recession when it happens to your neighbor. It’s not a depression until it happens to you.
Comment by James Madison Fan on 30 November 2010:
Mr. Campbell,
The reason South and Central America is fleeing North to the US isn’t because we undermined their agriculture. The reason they are fleeing North is over population relative to infrastructure. In the time it took the US to go from 100 million to 300 million people(roughly 100 years), Latin America’s population has grown from 60 million to 600 million. From 1970 to 2000 the population of Mexico doubled from approximately 50 million to 100 million. In that same period India went from 550 million to more than 1 billion and China went from 800 million to 1.2 billion. During this same 30 year period the US went from 200 million to 275 million.
The population growth rate for Latin America exceeds that of China and India (90% increase versus 82% and 53% respectively). In the 60’s India was having difficulty feeding a population of approximately 300 million until Dwarf Wheat and other crops increase food production by a factor of 4. Instead of having a better fed population of 300 million the population grew by a factory of 4 so the demographics didn’t change, only the number of people in each tier. Latin America is doing exactly the same thing but unlike India their excess population has the option of fleeing into a nation with a relatively stable population to infrastructure ratio – the US. We cannot continue to absorb the ever increasing number of financial refugees without destabilizing our economy and joining these nations in abject poverty.
Where it not for agro-business most of these people would starve so while I can agree that displacement represents a portion of the problem it is nowhere near as problematic as explosive reproduction.
As a brief aside, even if you were correct and all the illegals were a direct rsult of displacement by agro-business I fail to see how – I – owe them anything when the culprit is a multi-national corporation? Considering how much money we’ve loand to Mexico every tiem the Peso falls into the toile as well as the billions we’ve donated wholesale not to mention the second largest source of income annually for Mexico is money sent home by expatriots living in the US (20 to 30 billion) I’d like to know how much more you think I (we) owe before we’ve paid whatever debt you seem to think I (we) owe?
With this in mind I’d ask you to consider that at one time the jobs “Americans won’t do” were done by Americans. My great-grandfather was a miner. My grandfather loaded soap into trucks for P&G. Americans are no different than anyone else on this planet because Americans came from everywhere else on this planet.
If you examine the wages of low skilled workers (burger flippers, janitors, stock boys, etc.) into the 60’s, 70’s, and 80’s they kept pace with inflation with little manipulation of the minimum wage but this suddenly changes in direct relation to the increase in illegal immigration. Instead of having high-school and college kids doing fast food for a couple years and moving on these same positions have become life long careers.
If it were for the economic illusion of minimum wage hikes they would be making the same or less than I did when I was entering the work force 25 years ago because wages and scarcity of labor have a direct relationship. An increase in the scarcity of labor (fewer workers) means higher wages. A decrease in the scarcity of labor (more workers) means lower wagers.
We have approximately 200,000 unskilled workers crossing the border each year so the low end jobs are not keeping pace with the cost of living which is why Congress has to bump the Min Wage every couple of years in an endless quest for the unattainable “living wage.” If the economic illiterate in DC want to actually achieve a “living wage” they need to realize they can’t do it by lifting to floor because all that does is raise the ceiling and cause inflation. Wages only go up when labor is scares. They can no more violate this law than Gravity or Thermodynamics.
The only way to increase he standard of living in the Third World is to get a handle on their excessive population growth. Until they do that there is nothing we can do to help them and all that inviting them across the border does is drag us down, not lift them up.
Comment by Ralph Musgrave on 5 December 2010:
In his first two paras, James Ahiakpor makes the blindingly obvious point that unemployment benefits act as a disincentive to work. I think we’ve all tumbled to that one. He then deals with the more subtle point that the alleged increase in aggregate demand coming from benefits does not work because the money for those benefits is borrowed from the community or from those in work, hence (allegedly) there is no net effect.
The first flaw in that argument is that while Keynes did advocate extra government spending funded by borrowing in a recession, his real preference was for such spending to be funded not by borrowing, but by new money. I.e. he wanted governments, to put it bluntly, to simply print money and spend it in a recession, a policy also advocated by Milton Friedman here: http://nb.vse.cz/~BARTONP/mae911/friedman.pdf
Numerous other leading economists have advocated the same, e.g. the economics Nobel Prize winner, William Vickrey.
Secondly, Ahiakpor’s assumption that when government borrows and spends there is no net effect, is a nonsensical assumption to make in a short article like the above one. The question as to exactly how much government spending is “crowded out” by borrowing is a HUGE question to which hundreds of economisits have devoted millions of words.
Indeed, since Ahiakpor does not even use the phrase “crowd out”, I wonder whether he has read ANYTHING on this subject.
If Ahiakpor would like to write an erudite paper with something original to say on the subject of crowding out, then fine. But simply to assume an answer to the crowding out question, and an extreme answer at that, well that just won’t wash.
Comment by voteright on 6 December 2010:
Anyone proposing Keynesian Economics should be put in a nut farm in Siberia or Sub-Saharn Africa.
Comment by TucsonTom on 6 December 2010:
I can’t help but wonder if Dale was a proofreader when he worked in the printing business.
Comment by TucsonTom on 6 December 2010:
When I was growing up my father worked in a seasonal job. Each winter he received unemployment compensation. He would always look at his net earnings when deciding whether to take a job offer. Because of the way unemployment works, when you earn over a certain amount your benefits are reduced or cut off. So, for example, my dad got $100 per week in unemployment. If he took a part time job paying $50 per week, he’d get $50 in unemployment benefits, so it “cost” him $50 to work. If he got a job paying $100 per week, he lost his unemployment benefits, so he worked for nothing. If his employer wanted him to work, say, Wednesday-Friday for $120 he’d net $20 for 3 days work. Was unemployment a disincentive to work? You bet your bippy! Unemployed people know math, too.
Comment by JoeBlow on 6 December 2010:
Mr. Campbell. By not supporting a continuation of Unemployment Insurance benefits it can force the issue of the overall budget.
If politicians truly work for compromises that will benefit us all then let the politicians who WANT to extend UI checks find a place somewhere else that they other politicians would agree to CUT and equal amount to fund it.
A fair exchange on the budget sheet. Of course cutting somewhere else isn’t easy – but my point is that an option exists which will NOT increase taxes and the deficit.
Don’t follow the false concept that only two options exist: increase UI or don’t increase UI.
Comment by mark on 6 December 2010:
Another way to look at it, Unemployment benefits protect the assets of the working. If unemployed cannot stay in their homes with mortgages, the banks foreclose, which causes the value of other owners homes to drop. The reduced consumption is a drag on the economy that depends on it, including the other worker’s jobs. Unemployment is a stimulus to the cash flow of the economy. Reduced cash flows reduce every one’s ability to consume, and consequently the demand to produce. Without a form of unemployment compensation, the economy slows even further.
There might be better methodologies to provide for unemployment compensation, but to say it is not required is another animal all together.
Comment by The NetArchitect on 8 December 2010:
I am curious how many who oppose the Unemployment Insurance have actually ever been unemployed. I only mention this because I recently found myself in this position. I was downsized due to budget cuts about 6 weeks ago. I have been in my field for just over 25 years now and have paid 1/3 of my income to the Government in one form or another before I even had the luxury of paying taxes on everything I purchase. I now find myself in the uncomfortable position of living on a monthly income which is 3 dollars less than I make a week when I am employed. So in reality I am basically living on 4 days pay a month, yet I still pay the same amount of tax on everything I buy, and I get to hear what a drain I am on the U.S. Economy every time I try to catch the news.
It seems to me that for all I have paid into the system I am now amongst the poorest people in the country, all because the firm I was most recently employed by, found that they could show a better bottom line to their shareholders by outsourcing mine, and several hundred others positions to a country on the other side of the globe. Yet the company sells their product for the very same price as they did 6 weeks ago, but pay the one doing my job now less than I get on unemployment.
I suppose the company doesn’t have to pay insurance or income tax on them, nor an import tax or tariff, so what incentive do they have to employ me, when they can still enjoy every benefit of being a U.S. Firm, without incurring the overhead of a U.S. firm. I am scrambling to get back to work, but unfortunately no one wants to bring me in before the new year begins, and then most of what I am seeing is offering less than I made when I started in my field 25 years ago. I know I will recover because, I have no debt to speak of, and what investments I held onto are slated to come to fruition in the coming months. But perhaps, it might be best to cut off all unemployment insurance for all of us in the dead of winter. That may well be the spark needed to pull together several million disenfranchised, hungry patriots with nothing left to lose, and way too much time on their hands. although the rate is 9.8% that only counts those who actually do qualify for any UI payment. I believe if the truth were known, the current rate of those who are actually unemployed is closer to 22-27% of the population.
I never complained about paying into the system all these years. I have inserted 122,600.00 +/- 4% into Social Security which I may never see a dime of and surely that is my money, not some entitlement as I hear all too often. Someone said earlier in the thread that it makes no sense to allow millions to drop off into the oblivion of homelessness, and it is wise for those who are doing well now to remember this advice, because no job is recession proof, no industry is depression proof, and if trends continue, this harsh reality may come home to roost all too soon for those who bemoan the state of the affairs in this long, cold winter.
I believe Milton Friedman had it right all along, and I wish he were here today, but he is not. So many are leaving us at a time when they are most desperately needed by those of us who are left to pick up the pieces from the world they left behind. I will continue scrambling as long as there is breath in me, to regain my modest life in the lower middle class of earners, but I cannot help but hold my breath at the thought of 30 million hungry Americans suddenly realizing what just happened… It doesn’t seem as though it will turn out well for anyone involved.
Comment by Beth on 19 December 2010:
I have been unemployed a few times in my life. I know exactly what it is like. I know the intense worry one has about their future and the worry about making ends meet immediately.
I have responded to it in two ways. The first – I re-examined my life goals and gave a hard look at if I was going in the right direction. This resulted in turning my attention to other occupations to pursue. I became a productive again as I immidiately sought full time work or multiple part time positions. I may not have enjoyed the type of work at the time, but they provided me with incentive to be a better employee and to find other ways of being productive in the future.
Two – I filed for unemployment and milked it out as long as I possibly could have. I reasoned that it made more sense to stay home and take in less pay than to exert myself and work full time. Since the typical wages in my area were not that great for my skills, it made more sense to sit at home than to go out into the world and be productive. Only when unemployment insurance ran out did I get motivated to be productive again. It paid for me to be on unemployment. It took my focus off of improving myself as I was satiated for at least the short term.
Comparing the two choices that I have made in my life concerning times of unemployment, I was much better off financially and in a self-respect point of view to rely on myself instead of government unemployment insurance.
I did feel very guilty for taking the unemployment “benefits” because I knew that the monies I recieved were forcibly taken from some other American. Even though I was truly “needy”, I still believed that it was wrong for me to have done that. I am responsible for my life both when it is going good and when it is going bad. It is not moral to be the recipient of stolen property even if you find yourself in need. It is not moral to steal from other Americans even if it for a good cause.
I have told people for a long while now that we humans have not progressed like we say we have. It is laughable. We still practice slavery today, it has taken another form and it is whitewashed with nice names and justified by good causes and humanitarian goodness. We are forced to help our fellow man through the tax code. We have no choice. This is forced servitude, which is another word for slavery. Our modern day slavery has nice names for it: welfare “benefits”, stimulus, bailouts, subsidies, assistance, helping those that can’t help themselves, and unemployment insurance.
What good is freedom if you are not really free?
I am in no way against helping those that find themselves without jobs or various other circumstances. Helping those in need with your own money taken from your own pocket is moral and good. Picking your neighbor’s pocket to help those in need is wrong.
This website provides multitudes of reasons and proofs that our nation would prosper if we ended all these unjust transfer programs. Not only would it benefit the wealthy, it would benefit the poorest among us as well.
Comment by Sasha on 27 December 2010:
I have a few problems with these economists I’d like to share.
The first has to do with this statement:”Since the time of Adam Smith, political economists have agreed that we do not in reality buy the objects we consume, with the money or circulating coin which we pay for them. We must in the first place have [acquired] this money itself by the sale of productions of our own. . . . It is then in strict reality with their productions that [people] make their purchases; it is impossible for them to buy any articles whatever to a greater amount than that which they have produced either by themselves, or by means of their capitals and lands.”
This leaves those whom loot and those who inherit out of the picture. My guess is that Adam Smith himself was from a wealthy family, and thus would be careful to paint a picture with his words implying it was all deserved. This is not always the case, as banks make money out of math involving deficit, i.e for every 1000 in reserve 10000 can be loaned out at interest. If you’d like to semantically argue that the pieces of paper claiming the money has worth at all count as their contribution, or that by use of guns/swords/laws they justly used their own production in theft, then perhaps it is not so untruthful of a phrase after all.
Unemployment is a means to prevent rioting, which directly benefits Cronyist Capitalists in the sense that the paltry sum received is stretched furthest using their stores. Not only do the people not riot due to being nearly regulated out of existence (many have seen how few can afford start up business costs, thus enabling those of wealthy families a shadowed monopoly over many industries.), they don’t even sense the problem, after all the government has there backs in ensuring they get food stamps and a bit of survival money.
This false compassion (I do not trust a majority of politicians to be in it for the public’s well being), directly benefits the corporate sponsors of these politicians: Many can not afford to buy American made, and can only afford the costs set at corporate Giants which is artificially lowered due to them buying in bulk from Communist and other nations with enforced near slave labor. This aides the monopoly of places like Walmart, and increases the amount of troops to loot other lands for American based oil conglomerates (which is a base bone for many of the main corporate production methods). Without employment and with the high amounts of disrespect many of the unemployed receive, when the advertisements make it out to be that they can get money for their families, a higher likelihood of getting a job upon return, and respect (something that a majority of most corporate workers seldom see from their employers), many are willing to go kill other over seas in the name of their oppressors. During training of course you can count on a certain amount of cronyism in who is getting paid to train these people (many of their supplies come from near slave labor in American Prisons and Illegal Immigrant internment camps here in the states). The unemployed and those on welfare do not know, and cannot help themselves in the boundaries of the law in many cases, that they are being used to increase monopolies further by draining the middle class (though to be fair most of that money goes to war and government salaries, and they are the designated scape goats for the middle classes frustration- an effective soldier factory). I know those who are on SSI and who are delaying marriage because they could not afford to care for their children if they were considered a married person- and if they were to go to work they would lose large portions of SSI and have to spend it all on Daycare for their child with both parents working. (Remember law has it that you can’t baby sit more than 3 kids or you’ll have to face the consequences). In short, to get off the paltry sum SSI gives them from the paychecks of others, would cause her to lose all the money she would make, because of the costs of Childcare, and the educational requirements for almost every job except the least well paying (which ironically enough pay too little to allow most people to save for education and thus raise their standard of living) baring her from jobs. Even more despicable is the college cartel’s flaunting of power and shadow cronyism with the banking establishment and corporate America- With only about one if five college students landing a decent related to their degree job, and most of them having student loans of upwards of 10,000, as well as car insurance and cell phone bills, upon release they have to start paying back the loans- with interest, with no jobs, 80% will have to work at dirt paying jobs for a looooooooonnnnnnnnggggggggg time to pay back the loan, or ruin their credit entirely by declaring bankruptcy, which is more difficult than it used to be from my understanding. This gives corporations something of a indebted servant, because they in effect control the job market due to over regulation, they can pay the people damn near minimum wage, and with the legal enforcement to pay back the loans (or get them ‘refinanced later down the line, which I understand to mean a COMPLETE reset on the loan, but in smaller monthly denominations), they have little alternative.
Unemployment would end much quicker if the costs and barriers to starting businesses were removed out right, or greatly diminished. This would open the market, and many would prefer to buy beer brewed by their friends and neighbors for a bit of a premium than one of the BUD conglomerates brews. If internships (paid or otherwise) were all that was required for the college education level jobs, many more people in this nation would be employed, and many more doctors offices and the like would have more staff leading to less of a delay in emergency care and outright hospital costs. As it stands almost all the doctors have HUGE student loans, and thus need to be paid a very hefty fee to keep the bankers and the schools satisfied. Omit this pay to play system, and allow doctors to pass an exam certifying they know what they do, once the doctors they train under believe them to be ready, and economic prosperity in America, as well as economic choice should grow within a decade.
Comment by Benjamin Pearl on 28 February 2011:
I honestly haven’t read throught all of these comments, but I want to add in a single point. The Social Security tax reduces overall employment rate, while getting rid of it will increase employment.
The largest tax upon the nation is the Social Security tax. This includes unemployment wages. One said that only 1 million jobs are available while 4 million are jobless.
Getting rid of the SS tax on companies would increase employment. Well, businesses pay from around 7.5 to 8.5% of the money that all their employees earn (this is only social security tax). My father owns his own business and my older brother is his only employee. Currently, the business earns much less profit because my father must pay the tax for my brother. My dad has no intent of expanding, but the principal applies. My dad could much more easily pay for more employees, if he did not have to pay such a tax.
All, every single, private business in America suffers the plight of rough taxation. Completing ridding the system of, or at the last heavily reducing, the payment those in unemployment will relieve the businesses severely.
So, a businesses has more money. Now the rich have more money, right? No. The vast majority of businesses will try to expand, thereby earning even more money. Almost exclusively, expansion requires more employment. The business expands, hires more employess, expands, hire more employees, etc. This does not occur all the time, and business recesions do happen. But, as I said before, most business will expand; furthermore, recesions are as common as economic booms. The business stops losing money from the business and puts more money into getting bigger or sustatining themselves. The opposite is the rather heavy taxation of current, where companies often go out of business, thereby causing more to lose jobs.
On a switched side, reducing the SS tax on the empolyees indirectly causes more employment as well. So, again the rich have all the money? No. The vasy majority of “rich” spend their money or save/invest it. In either case, the money is given to a company or cpoeration of same sort. Now, the company has even more money to expand. And, what does expansion almost exclusively result in? You already know.
Reducing the Social Security tax will definately increase employment. Doing so has some other benefits, but, for length’s sake, I will not list them.
Too Long; Didn’t Read version:
Getting rid of the Social Security tax gives more money to business directly (through paying less expenditures) and indirectly (and through having more money in their pockets by consumers). That means the business will expand. An expanding business will need more employess and therefore hire more.
I did not address every detail, but do any of them null the point?
Comment by systemcollapsing on 15 August 2011:
Guaranteed Livable Income, a base cheque that goes to everyone regardless of status or skin color for the necessities.