Category Archives: unemployment

Is Our Economy Truly Recovering From the Recession?

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In yesterday’s Wall Street Journal, Mortimer Zuckerman, the Chairman of U.S. News and World Report, writes that “A Jobless Recovery is a Phony Recovery”.  He points out that counting the people who want full time work and can’t get it, as well as those who have stopped looking, the real unemployment rate is really 14.3% rather than the officially reported 7.6%.  Enormous fiscal (deficit spending) and monetary (quantitative easing) stimulus has been able to stimulate an average growth rate of only 2% for the past four years since the recession ended in June 2009.  During these last four years the civilian workforce-participation rate has actually declined from 65.7% to 63.5% which has never happened before in an even slowly expanding “recovery” like we have at the present time.
Keynesians and Obama Administration apologists say that we need even more fiscal stimulus (we can worry about deficits and debt later); tax reform won’t help because tax rates are already low; massive new regulations (ObamaCare, Dodd-Frank financial regulations, EPA environmental regulations) are so important that they override negative economic effects; etc.  At some point, the sooner the better, we need to recognize that current policies are not working and are, in fact, retarding the recovery from the recession.
Tax reform is the biggest single change which would help.  Removing deductions and tax preferences, and replacing them with lower tax rates, would give a big boost to investment and entrepreneurship, and thereby be a huge stimulus to the economy.  This includes eliminating the tax exemption for employer provided health insurance.  Combining this reform with repeal of ObamaCare’s Employer Mandate would also lead to getting the cost of healthcare under much better control.  The overall cost of healthcare, 18% of the American economy and growing, is a huge long term burden and must be turned around.
The massive complexity of Dodd-Frank is a huge burden on the financial industry.  Preventing banks from becoming “too big to fail” can be accomplished by having more adequate reserve requirements along with sufficient default and liquidity insurance pools, along with otherwise minimal regulation.
Only more private investment and risk taking can make the economy grow faster and bring down the unemployment rate.  The sooner our national policy makers (and the voters who elect them!) figure this out and act accordingly, the sooner that our economy will truly begin to recover from the Great Recession.

Should the Employer Mandate Be Repealed?

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In last Sunday’s New York Times the columnist Ross Douthat makes an excellent case in “A Hidden Consensus on Health Care”,  that Obamacare’s employer mandate, recently postponed for one year until January 1, 2015, should be repealed altogether.  The reason for delaying its implementation is because of the complexity of the process for the government to gather all the necessary information about a company’s employees and coordinating with IRS tax returns to verify incomes.  This is, of course, a mammoth job.
Furthermore, small and medium sized companies, near the 50 employee cutoff for mandatory coverage, will not have to immediately slow down their growth, in order to avoid the health insurance requirement.  This could help boost the economy in the short turn.
In addition, as Mr. Douthat points out, it is the tax exemption for employer provided health insurance which is the biggest impediment for getting the cost of healthcare under control.  It means that employees are shielded from the true costs involved in receiving care and therefore have little, if any, incentive to hold down the cost of their own care.
If this tax exemption was eliminated, perhaps as part of a broad based tax reform initiative, then employers could still offer an optional health insurance benefit to their employees but it would be taxed as part of their total pay.  This would give employees an interest in holding down the cost of their own insurance.  And they would also have the option to shop around on the private market, perhaps on the new exchanges, for a better deal.
The Employer Mandate is thus altogether a dead weight on our struggling economy.  It’s certainly beneficial to have it postponed for a year.  Let’s go the rest of the way and repeal it altogether!   This would be a significant step towards true healthcare reform!

Who is Conducting War on the Unemployed?

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In his ever provocative fashion, columnist Paul Krugman claims in today’s New York Times that fiscal conservatives, i.e. Republicans, are conducting “War On the Unemployed” because extended unemployment benefits are being allowed to expire both nationally and in various states around the country.  According to Mr. Krugman it is “meanspiritedness converging with bad economic analysis” because more government spending will boost the economy and, moreover, the federal deficit is nothing to be concerned about.
The problem is that we have now had enormous fiscal stimulus, i.e. huge federal deficits, for five years, as well as a highly expansive monetary policy, and the economy is still barely limping along at a 2% growth rate.  It is unfortunate that so many liberals are ideologically opposed to broad-based tax reform whereby tax rates would be lowered in a revenue neutral way by either eliminating entirely, or else cutting back substantially, the many tax preferences, deductions and loopholes which pervade the tax code.  By emphasizing profit potential over tax avoidance strategies, this would give a big boost to business risk takers and thereby lead to economic growth and lower unemployment.
At the same time that our economy is suffering from low growth and high unemployment, our national debt is exploding to a large extent because the federal government is spending too much money.  Efforts to rein in government spending across the board are highly desirable and should be supported as simple common sense.
By advocating tax reform to boost the private economy and, at the same time, restraining federal spending wherever possible, fiscal conservatives are helping the long-term unemployed far more than their supposed champions who are doing just the opposite!