Top of the News: The horns of our dilemma poke through with the extension of unemployment benefits, authored by Washington Democrat Jim McDermott, that just passed the House.
The bill would add 13 weeks of benefits for more than 300,000 people who are scheduled to tap out their funds this month. They must live in states, including Washington, with unemployment of 8.5 percent or more. McDermott was careful to say that the extension won’t add to the deficit; it will be funded by extending a $14-per-worker tax on employers.
One downside is an additional burden on companies at a time when much of the economy has yet to turn around, providing an incentive for further job cutting. But what else can be done? With a real unemployment and underemployment rate of more than 16 percent, America is not a nation of deadbeats. Few jobs are to be had right now. People are desperate.
Politicians must now always make offerings to the dreaded deficit god. In the Depression, FDR didn’t like deficits — he was fairly conventional in his economics; neither he nor Keynes likes each other — but he was supple enough to listen to his Brains Trust. They used deficit spending to put people to work, revive employment considerably and make investments in infrastructure that repaid the Treasury many times over.
The catch: Back then, the U.S. entered the Depression with its books more or less balanced and as the world’s largest creditor nation and trading nation (and as a major petroleum exporter). This time, Washington’s fiscal and international credit standing is a mess. It is a problem decades in the making; and the fact is that most of the deficit came from the previous administration, plus the financial crash. Conservatives and liberals can argue over the degree of the deficit’s dangers — but the mess is a reality.
That gums up the classic Keynesian strategy of using government spending to aid an economy in recession, then returning to surplus once the economy revives. As things stand, Washington must eventually raise taxes or cut programs — or face a global loss of confidence in the dollar.
But — what else is to be done in this crisis? Despite a few nihilists who would let “those people” starve in the streets, most agree government must continue its intervention. And pray the labor market heals soon.
Today’s Econ Haiku:
The Fed is meeting
Must be nice to have a job
And a printing press