Posted by
Andrews on Monday, February 23, 2009 10:50:24 AM
I was browsing
another blog, when I saw a quote that thrilled me:
Louisiana Gov. Bobby Jindal announced Friday that he will
decline stimulus money specifically targeted at expanding state
unemployment insurance coverage, becoming the first state executive to
officially refuse any part of the federal government’s payout to
states.
In a statement, Jindal, who is slated to give the Republican
response to President Barack Obama’s message to Congress on Tuesday,
expressed concern that expanding unemployment insurance coverage would
lead to increased unemployment insurance taxes later on.
“The federal money in this bill will run out in less than three years
for this benefit and our businesses would then be stuck paying the
bill,” Jindal said. “We must be careful and thoughtful as we examine
all the strings attached to the funding in this package. We cannot grow
government in an unsustainable way.”
For once, a politician understands the truth, that, as Benjamin M. Anderson said "We can have as just much unemployment as we want to pay for." Unemployment insurance causes unemployment to rise.
Of course, unemployment insurance is not the only cause of unemployment. There is also welfare, union laws, minimum wage, and a host of other government policies. And there is also inflation, which distorts the economy and can, especially later in an inflationary cycle, cause tremendous unemployment, despite Keynesians and their belief in the Phillips' curve. And, ignoring the state for a moment, there will always be some "frictional" unemployment, as people seek new jobs, take time off between jobs, choose to live on savings for a time, or otherwise choose not to work for a time. But, state unemployment insurance is a big cause of high unemployment figures.
And it only makes sense.
Think of your own experience. If you are without a job, for whatever reason, your behavior depends on circumstances. If you have no savings, no severance pay, no other source of revenue, you will likely take whatever job you can find. However, if you have a month or two of living expenses saved, then you will be more choosy, and add yourself tot he unemployment count for a longer time.State unemployment insurance works the same way, if your benefits are about to run out, then you are far more likely to take an imperfect job than if you have months of benefits left. And so, with many taking longer to find a job, the number of unemployed rises.
But extending state unemployment also increases numbers another way. There are some on the unemployment rolls who really are not job seekers. They apply for jobs, but only to continue benefits. When benefits run out they will drop out of the calculated work force, as they will stop seeking a job. By extending unemployment benefits, you keep these people in the calculations longer. Granted, these unemployment benefit seekers, rather than job seekers, are not a large part of the number, but prolonging their recognition as job seekers does allow more to remain in the system and adds additional distortions.
So, hurrah for Gov. Jindall, for saying something sensible and showing a true understanding of economics. Unfortunately, if he ever runs for federal office, it will probably be used against him to show he is "heartless".
POSTSCRIPT
Back int he 1980's I was a fan of Phil Gramm, but agreed he would never win as he understood economics and thus could never give a soundbite. In addition, I argued that the electorate was so used to nonsensical Keynesianism they would never accept anyone who spoke the truth about economics. I am afraid Jindall may become the next Phil Gramm, a guy I adore who can't win office to save his life.
POSTSCRIPT II
As I am so unhappy with
those who call people in general "stupid", I need to clarify my previous Postscript. I do not think people are fools, but they can be misled by a popular idea. And since the government, and both parties, have pushed Keynesian nonsense for so long, people have come to accept it. They are not foolish, but most are not interested enough in economics to question what they hear all the time. And so the bad idea persists, mainly because no one has spoken out against it in a sufficiently public forum.