THE STATE JOURNAL-REGISTER
George W. Bush’s administration was many things, but fiscally responsible wasn’t one of them. After inheriting a balanced budget and declining federal deficits from Bill Clinton, the Bush administration decided to pursue the disastrous path of intentionally cutting federal revenue — by cutting taxes — while simultaneously increasing spending significantly, primarily to pursue wars in Afghanistan and Iraq. The Bush administration ended up financing both the wars and tax cuts by borrowing — the height of irresponsible fiscal policy.
Then the recession hit, devastating the economy during Bush’s final year, causing tax revenue to plummet just as the need for increased public spending skyrocketed. In response, Bush implemented numerous costly initiatives to bail out the financial industry and others, again financed with debt.
Given that backdrop, it’s interesting to see the sudden surge in deficit hawks populating both major political parties — especially since many of them previously supported the fiscal missteps of the Bush administration. It’d be great if this newfound concern with all things deficit presaged a thoughtful, bipartisan approach to implementing sound fiscal policy designed to meet the real economic exigencies facing our county. Yeah, that’d be great. It’s also unlikely.
That’s because most deficit concerns being raised are motivated far more by politics than any desire to pass good policy. So much so that facts are being intentionally distorted or ignored while fiscally immaterial, short-term initiatives are wrongly being castigated as creating material, long-term issues. Nothing illustrates this deficit folderol better than the debate over whether to extend the time period for claiming unemployment insurance benefits.
The UI program is intended to ensure the unemployed have a little something to cover living expenses while looking for work. In fact, demonstrating that you’re actively seeking a job is a condition to being eligible for UI benefits, which currently average a meager $293 per week. In normal times, a person can generally receive UI benefits for a maximum of 26 weeks, or just over six months. In extraordinarily difficult times, the feds have extended the benefit period.
Today, of America’s 15 million unemployed workers, almost half, 6.9 million or 46 percent, have already been unemployed more than six months, the highest percentage suffering from long-term unemployment since the feds first began monitoring it in 1948. The Congressional Budget Office estimates the cost of extending UI benefits to those unemployed long term will be $40 billion through November. Deficit hawks claim government can’t afford this, given the deficit already eclipses $1 trillion. Some even maintain extending UI is counterproductive because — get this — it encourages the unemployed to avoid taking jobs so they can keep receiving that great benefit check from the feds. Time for a reality check.
Start with the cost of the extension — $40 billion. Sure, that’s a lot of money in the abstract. In context of the federal deficit, however, not so much. In fact, it’s just 3 percent of the fiscal year 2010 deficit. Compare that to the $450 billion cost this year for the Bush administration’s tax cuts, plus the interest on the federal debt incurred to finance those tax cuts and the wars. Those Bush policies are more than 11 times costlier than extending UI and account for more than 40 percent of the current deficit.
Oh, and according to Citizens for Tax Justice, 70 percent of Bush’s tax break — or just over $200 billion in fiscal 2010 — goes to the wealthiest 20 percent of Americans. Certainly, helping everyday folks who’ve lost jobs put food on the table and sleep indoors is worth one-fifth of the welfare given to the wealthiest by Bush’s tax cuts. Moreover, the $40 billion for extending UI is a one-time, short-term cost, while the Bush tax cuts are long-term, recurring costs that drill holes in the budget every single year, are the greatest single cause of the long-term deficit and account for more of the problem than the recession and Barack Obama’s stimulus programs combined.
As for the contention that extending UI encourages people to avoid finding jobs so they can stay on the public dole — well, it’s just plain goofy. In May 2010, the private sector created only 41,000 jobs. That’s 72,000 less than what’s needed to keep up with the demand generated by natural work-force growth, much less creating the positions needed for the unemployed to find work. No one’s thumbing a nose at getting hired to live in luxury eating government cheese — there simply are no private sector jobs available.
Perhaps the hawks have forgotten that consumer spending accounts for more than two-thirds of the nation’s economy. The best consumers are low- and middle-income folks, who don’t earn enough to save, so they spend their paychecks. That is, when they have paychecks. See, if they’ve lost their jobs and the private sector isn’t creating jobs and the feds cut off unemployment benefits, their ability to spend drops to, well, nil. Which is why the amount of private sector economic activity stimulated by unemployment benefits is greater than any other fiscal action government can take. In fact, dollar-for-dollar, it’s five times more stimulative than the Bush tax cuts.
Sure, the long-term deficit has to be dealt with — but honestly and responsibly. Short-term, deficit spending — particularly on things like unemployment insurance, food stamps, housing assistance and the like — is creating jobs and saving the U.S. economy from disaster.
Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank. His e-mail address is rmartire@ctbaonline.org.
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