A Government Safety Net For The Unemployed: A Tax Cut And 10% Jobless Rate

Unrelated and often random comments from the incoming Congress and administration are beginning to create a tapestry of remarkable pessimism and diminished hope. No one believes now that the economy can be fixed fairly quickly even with a new $750 billion bailout package.

There was little reason to anticipate that this plan, designed to put hundreds of billions of dollars over two years into national infrastructure with a target of creating three million jobs, would work quickly. Most of the programs which are part of this economic package are complex and will take several quarters to add jobs for American workers.

Word is that the new administration and new Congress may add a $350 billion tax cut to other programs, but the passage of this legislation is far from assured.

Over the last several days President-elect Obama has said that unemployment could move to the double digits. According to Bloomberg, in his weekend radio address Mr. Obama said “If we don’t act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment.”

The New York Times reports that "Democrats are considering major expansions of government-assisted health care insurance and unemployment compensation as they begin intensive work this week on a two-year economic recovery package."

These comments, along with the accelerating disintegration of the economy, support the fact that any programs that are not fully functioning until the latter part of this year will do nothing to reverse joblessness in the short term.

The chances are now nearly 100% that the federal rescue will include not only banks and corporate institutions but also hundreds of thousands of individual workers. The programs to spend what could be a trillion dollars to create jobs will certainly be supplemented by support for unemployed workers are not suited to do new work helping to build roads, buildings, broadband, and energy infrastructure.

The decision to provide unemployment and health benefits, in addition to job creation, is a quiet and subtle admission that some workers are not employable. This is almost certainly true of the majority of those who will lose jobs in the automotive and retail industries. Many of these people do not have the education to work in the new government stimulus programs. Others will not have the financial resources to relocate to the geographic regions where new jobs will become available.

No one is talking about the truth… that an extremely deep recession will leave a number of people not only unemployed but unemployable. The new administration and Congress have not yet announced any programs that will save a large percentage of the nation’s workforce from permanent joblessness.

This raises the theoretical question of the federal government’s ability to ever reverse economic forces which are increasing joblessness, homelessness, and decreasing confidence. It is possible that the economy requires cyclic periods when it must be fallow to allow it to reset at levels where hiring and buying goods and services become affordable again.

Douglas A. McIntyre

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