Earlier this year, the US Congress agreed to extend benefits for the millions of people on unemployment; the total term one could stay on unemployment was 99 weeks, hence the term "the 99'ers". There are a little more than two million of these people.. and their time on unemployment has ended, beginning yesterday. By Christmas, all two million will see an end to their benefits. As next year unfolds, yet more people will lose these benefits with each passing month as well, but not in a deluge like this month.
There is now a battle in Congress by Democrats to try and extend this; the Republicans are putting their foot down, siting the need to reduce spending. Some conservative Democrats, calling themselves the "Blue Dogs", have agreed to extend the benefits.. so long as there are corrosponding spending cuts elsewhere. The total cost of extending these benefits three months would come to $12.5 billion.. which in Washington really is a spit in the ocean. Many Republicans argue that it's time these folks get off their @sses and get a job, no matter how menial.
For years, I myself would've lean towards the Republican position.. I myself have never in my adult life been without a full time job and have never received a dime from welfare, unemployment or any other social aid agency. But this time I'm leaning towards something different, and it's because I believe that America's problems are more serious now than at anytime since the Depression. I simply refuse to believe that this is a cyclical recession; these job losses are a permanent facet of life.
Unemployment is one of the few ways the US Government can directly help us folks on Main Street that does not involve trickling down through Wall Street. It also helps those who through no fault of their own are without a way to earn a living. As well as these things, it does some dandy things in the macroeconomics arena as well.. it helps consumer spending. The cut in benefits will hurt consumer spending.. at Christmas time as well. Better yet, it enables millions of families to continue paying on their credit card, mortgage and other bills instead of defaulting on them. For politicians, the immediate rise in the unemployment rate from 9.6% to over 11% might not be attractive either. At some point, even us econo-nerds must also realize the pain this will inflict on millions of families.
Therefore, my solution is this: extend benefits for those who live in counties where the unemployment rate exceeds 9% for six months.. which is probably better than 2/3rds of the 99'ers. These people are simply unable to find work. For those who are in counties where it is not, it's time to find a job. Here in Minnesota, we have plenty of entry level jobs available.. many thousands of people here simply don't want to go out into the cold and work for a living. Unemployment is not for people like this. How do we pay for it ? Given that this would cost approximately $2 billion a month, I propose the following cuts:
* Department of Defense: $1 billion/mo
* Department of Education: $500 million/mo
(slice aid to non citizen students)
* Slice "Earmarks": $500 million/mo
America's unemployment problems are not cyclical; we will not grow our way out of this. It's high time we as a nation begin to think about the serfs instead of sending armies abroad to fight in places we can't even pronounce and the pet projects of corrupt politicians.
Update 12/6pm: Obama has apparently reached an agreement with the Repubs: another 13 month extension of u/e benefits and all of the Bush tax cuts will remain in place for another two years. This is going to blow a gaping hole in the deficit. It's apparent that the path of least resistance in Wash DC is to just borrow and spend ad finitum. Tomorrow will be an interesting day in the Bond markets.