Washington is in the middle of another debate about redistributing money.
But that’s hardly newsworthy. Politics, after all, is basically a never-ending racket in which insiders buy votes and accumulate power with other people’s money.
The current debate about extending unemployment benefits is remarkable, though (at least from an economic perspective), because certain politicians want to give people money on the condition that they don’t get a job. Needless to say, that leads to a very perverse incentive structure.
There is a problem with joblessness, to be sure, but it’s misguided to think that extending unemployment benefits is the compassionate response.
Senator Paul and I wrote a column for USA Today about a better way of helping the unemployed. Looking at the empirical evidence, we argue that it’s time to unleash the private sector by reducing the burden of government.
We started with an assessment of the labor market, which has been dismal under Obama’s reign.
The nation is enduring the weakest recovery since the Great Depression, 11 million people remain unemployed, and millions more have dropped out of the labor force. For minorities, it’s even worse. The black unemployment rate is more than twice that of whites. And the weak job market means that even those who are employed are having a hard time climbing the economic ladder.
We explain that more unemployment benefits is a misguided approach.
There’s a lot of talk about helping those down on their luck, but there’s a big divide on the best approach. Our view is that America needs a growth agenda based on reducing the burden of government. The unemployed need a strong job market, not endless handouts that create dependency. …There’s an understandable desire in Washington to “do something,” and extending benefits once again certainly is the easy route for policy makers. But if we are serious about keeping workers out of the long-term unemployment trap, we must have a debate about which policies cause unemployment and which policies create jobs.
The column cites many of the academic studies showing that unemployment benefits lead to more joblessness.
I’ve made this point during television interviews, and this Michael Ramirez cartoon echoes our thinking in a more entertaining fashion.
And we definitely can’t overlook this superb Wizard-of-Id parody. It doesn’t focus specifically on unemployment benefits, but it makes a great point about labor supply incentives.
But let’s get back to the column. Our main goal is to identify the types of policies that would generate jobs and growth.
Simply stated, genuine compassion should be defined by helping people get back to work so they don’t need to be wards of the state.
And easing the burden of government is the best way to make that happen. Our column looks at some evidence – from both overseas and here at home – about the policies that are associated with better economic performance.
Big government is responsible for today’s unemployment situation. …Since President Obama was elected, we have spent $560 billion on unemployment benefits. It’s likely many more jobs would have been created had the government not diverted that money from the economy’s productive sector. …Instead of copying stagnant European nations with bigger public sectors, we should learn from countries that have achieved better performance by lowering the burden of government. Singapore and Hong Kong are examples of jurisdictions with small governments and free markets that enjoy strong and sustained growth with very low levels of joblessness. …look at Canada, which has significantly boosted its jobs market with pro-growth reforms, or Switzerland, which has cemented its traditionally strong labor markets with reforms to control the growth of government. This is not a partisan argument. Or at least it shouldn’t be. The United States enjoyed strong levels of job creation during both the Reagan and Clinton years. But in both cases, public policy was largely the same, featuring an increase in economic freedom.
Some people may wonder whether Reagan and Clinton belong in the same category.
Well, as illustrated by this chart, they both presided over periods with impressive job creation.
And they both presided over periods with generally good economic policy.
Reagan moved the country in the right direction on purpose. Clinton, by contrast, may have wanted to move the nation in the other direction, but he was unsuccessful.
Indeed, the evidence is very strong that the overall burden of government fell during his tenure.
Whether by accident or design, America needs another period of free markets and shrinking government.
For further details on the recipe for good policy, here’s the video I narrated for the Center for Freedom and Prosperity, which explains the conditions that lead to strong and sustained growth.
P.S. I’m obviously a fan of Senator Rand Paul. Not only does he choose good people as op-ed partners, he also gave me public credit for a good Obamacare joke.
P.P.S. On a separate topic, I wrote in December 2012 that the strongest evidence for media bias is which stories get covered. A perfect example is that journalists already have given 17 times as much coverage of the Chris Christie “bridgegate” scandal as they gave to the IRS scandal over the past six months.
International Liberty 
[…] To Be Genuinely Compassionate, Politicians Should Focus on Job Creation, not Unemployment Benefits […]
[…] Senator Rand Paul and I wrote about this issue back in […]
[…] Senator Rand Paul and I wrote about this issue back in […]
[…] which I reply by asking them why it’s good to pay people to not work and assert instead that genuine compassion should be defined by policies that enable people to find jobs and become self […]
[…] that’s largely the fault of government programs – such as unemployment insurance, disability, Obamacare, etc – that make it easier for people to choose to be […]
[…] From the perspective of good public policy, though, the real problem with such benefits (as personalized here and here) is that they lure people into extended periods of joblessness. […]
[…] unemployment benefits is not the win-win situation implied by the conversation since academic research shows that longer periods of joblessness when people get money for not […]
[…] unemployment benefits is not the win-win situation implied by the conversation since academic research shows that longer periods of joblessness when people get money for not […]
[…] is it compassionate to extend unemployment benefits if that meanspeople are less likely to get […]
[…] is it compassionate to extend unemployment benefits if that means people are less likely to get […]
[…] until recently, the government had a policy of endless unemployment benefits that made work relatively less […]
[…] going to happen.” …If we really care about workers, particularly those without jobs, the most compassionate approach is prosperity rather than […]
[…] the White House is to argue for more unemployment benefits. That’s not very compassionate, as Senator Rand Paul and I explained in a piece for USA […]
[…] the White House is to argue for more unemployment benefits. That’s not very compassionate, as Senator Rand Paul and I explained in a piece for USA […]
[…] To Be Genuinely Compassionate, Politicians Should Focus on Job Creation, not Unemployment Benefits […]
But it gets worse, as the empirical correlation between growth suppression and flattening effort-reward curves will be hard for voter-lemmings to extract from everyday observation, amidst a cacophony of more attractive and delusional narratives.
It is impossible to demonstrably extract a, say, underlying 1% baseline reduction in the long term growth rate from the fractal behavior of economic activity, recessions and recoveries. But that 1% difference will compound to a 30% prosperity difference in a generation and a 70% difference in two generations.
But that is not even the main problem. The main problem is the vicious cycle slower growth inevitably unleashes:
As they experience the longer term effects of the 1% reduction in baseline growth, American voter lemmings (like most, but NOT ALL, voter-lemmings around the world) will rush to the polls in an attempt to maintain their worldwide privileged standard of living through even more redistribution. That will cause further reduction in the baseline growth rate, thus closing the vicious cycle. Europeanization and its ultimate fate, Francification, then Italianization, then Grecification become inevitable.
The bottom line blunt reality is rather simple:
If the American Middle and Lower Classes want to maintain their exceptional standard of living — in the worldwide top fifteen percent — then they must accept single mothers who make 29k and CEOs who make 29million. Given current human DNA, there is no alternative to prosperity to keeping rather unadulterated effort-reward curves. Effort reward-curves which free markets automatically shape to be proportional to one’s true impact on human prosperity. This world of steep effort-reward curves is how America became prosperous in the first place. The maintenance of strong, unadulterated effort-reward curves requires, almost by definition, large inequalities.
But an overwhelming majority of voter-lemmings despises this reality with passion. They desperately seek a different narrative of prosperity (i.e. high growth) with flatter effort-reward curves.
Given the excruciating demand for such a message amongst the electorate, those who will provide it do not take long to emerge. There is such a strong demand for this type of delusional socialist message, and thus commensurate supply, that the electorate can find not only people who can provide such a delusional narrative, but also people who genuinely believe in it. After all, it is logical that those who truly believe in it will do a better job at selling it. It is far harder to build and live an entire political career based on hypocrisy.
Thus the optimal personality compromise in becoming a competent politician is to be smart enough to keep in synch with the pulse of voter-lemming socialist dreams, and faithfully competent and eloquent to sell them the delusional message they want to hear. But at the same time, be dumb enough economically to believe that growth and progress can be achieved through flattened effort-reward curves.
In summary, it is this delusion of the voter-lemming that is at the root of all other problems relating to big government. Most voters do understand the shortcomings of big government, but are willing to overlook them because they see government as the only enabler of redistribution and completely miss the compounding obliterating effects of sub-par growth.
So will the American voter-lemmings experience decline? In absolute terms NO. Few, very very few, people on earth will experience absolute decline in the generations to come. Life will keep getting better for the American voter-lemming, just as today’s Argentinian lives better than his father, and today’s Frenchman lives better than his father. But in relative terms, the American voter-lemming will experience definitive decline. So while other jurisdictions, with steeper and less adulterated effort-reward curves, will be able to achieve markedly better living conditions for their children, Americans will pass on to their children conditions that are only marginally better than the previous generation. This has not quite happened in America yet, but is quite well underway in Europe, where conditions for the current younger generation are not much better than conditions in the previous one, even in absolute terms. In relative terms, the prosperity of once top of the world Europeans is being obliterated, as a high growth tide of once underdeveloped world souls are fast catching up to European prosperity levels and thus rapidly submerging once enviable European prosperity towards the world average. America has not reached that European point quite yet,… but the American voter-lemming route to Francification has been irreversibly set. Americans do not see their decline coming, and thus regurgitating a decade of HopeNChange is out of the question.
So while today the American single mother at 29k (we even omit the redistribution that bumps her income to 57k) enjoys a standard of living in the world’s top 15%, her equivalent two generations from now will be down to the world average, in relative terms. Ie. still better than today in absolute terms, but that world will feel very different to Americans who will have lost their once earned worldwide prosperity advantage.
There is always the temptation to discount the enormous impact of growth by saying: “I don’t care about growth, as long as I see mediocre improvement as time goes by”. But that is the grand hippie delusion. When the world’s top ten percent, sometime in the next generation start having an earned access to something like a true cancer cure, and Americans are no longer in that top ten percent worldwide, then their lives will be wretched and miserable by the new inevitably rising standards — just like today we have come to consider anyone not able to obtain personal transportation or heart bypass surgery (things once sought only by the greedy insatiable few) as living an indecent life of wretched poverty.
In short, that is the mid-long term effect of below world average growth, compounding the voter-lemmings of HopNChange down towards the world average: Remaining relatively stagnant in an otherwise fast rising world. If Republicans want to get anywhere politically in the minds of voter-lemmings, they will have to adopt more HopNChange. Perhaps a Republican version of HopNChange, but still HopNChange,– i.e. coercive collectivism, yet of a different, supposedly promising new type. The vicious cycle has closed for America.