No real benefit

The legislative road to serfdom

It really is pathetic.  Congress in the US cannot legislate itself out of a paper bag.  On so many levels this story below from Bloomberg shows what is wrong with the democratic-cronyism economic system in the United States.  Politicians have no backbone and will keep extending unemployment benefits until the printed money literally runs out.

Think about it: the federal government is paying people for not working, and funding the programme with debt.  Could there be a worse economic policy?

Meanwhile, 5 paragraphs from the bottom, spot the fallacy from the journalist.  Faler states that the medical insurance subsidy meant that the average family paid $398 a month for medical insurance instead of $1,137.  Wrong.  The costs didn’t change for the average family because the subsidy HAD TO BE PAID BY SOMEONE ELSE!

When will governments learn that you can’t regulate, tax or subsidise yourself out of reality and into fantasy land?  Benefits, subsidies, relief and all other manner of state income support does not reduce the overall financial burden in the economy.  What is paid to one comes from another.  In this case, productive people and their productive children are subsidising the unproductive, largely made redundant in the first place by federal and state minimum wage laws.

Sad.

[bold emphasis by HA]

July 22 (Bloomberg) – President Barack Obama signed into law a measure restoring unemployment benefits that were cut off to more than 2.5 million Americans by an election-year fight over whether the cost should be added to the federal deficit.

Obama acted a few hours after the House gave final approval to the $34 billion plan on a 272-152 vote. Ten Democrats opposed the bill; 31 Republicans supported it. The Senate passed the legislation yesterday 59-39.

“Americans who are fighting to find a good job and support their families will finally get the support they need to get back on their feet during these tough economic times,” Obama said in a statement.

The president criticized Republicans for trying to block the measure and called on Congress to pass legislation that would boost lending and cut taxes for small businesses.

The usually routine unemployment aid extension had been bogged down for weeks in the Senate where Republicans unsuccessfully demanded that it be financed with savings elsewhere in the government’s budget.

“All I can say is, it’s about time,” said Representative James McGovern, a Massachusetts Democrat. “For seven weeks millions of Americans who have lost their jobs through no fault of their own have worried about how they’re going to pay for their groceries, pay for their rent, pay for their mortgage or pay for their children’s college tuition.”

Deficit Effect

Republicans said they support the extended benefits and opposed the measure only because of its effect on the deficit.

“Are we going to engage in fiscal child abuse and borrow the money, principally from the Chinese, to pay for this? Or are we not? That’s the question,” said Representative Jeb Hensarling, a Texas Republican.

The seating of the late Senator Robert Byrd’s successor, Carte Goodwin, gave Democrats the last vote needed to break a Republican filibuster this week.

The bill provides retroactive aid to those whose checks were cut off when benefits expired June 2, while extending through November a program offering up to 99 weeks of assistance.

The jobless can expect to begin receiving checks again as soon as next week, though some states will likely take longer, said Andrew Stettner, deputy director of the National Employment Law Project, an advocacy group for the unemployed. Benefits vary by state, ranging from $235 per week in Mississippi to $629 per week in Massachusetts. The national average is $310.

Dropped Provisions

Democrats dropped several aid provisions amid complaints over the cost. The bill won’t revive a 65 percent subsidy created last year to help the jobless buy health insurance through their former employers. That provision benefited up to 2 million households last year at a cost of $2 billion, according to the Treasury Department.

The subsidy meant the average family paid $398 a month for coverage rather than $1,137, according to the Henry J. Kaiser Family Foundation in Menlo Park, California.

Lawmakers also ended a supplemental $25 weekly payment, which will amount to a 10 percent cut in states with the least generous assistance, and dropped a tax exemption for the first $2,400 in aid. The bill also doesn’t provide additional aid to the growing number of Americans who have received the maximum 99 weeks of aid. A Goldman Sachs Group Inc. report predicted the number of Americans using up their aid could reach 400,000 per month.

Federal Reserve Chairman Ben Bernanke told lawmakers yesterday that the unemployment rate is unlikely to return to pre-recession levels any time soon. He said the jobless rate probably won’t shrink to 7 or 7.5 percent until the end of 2012.

It will take a “significant amount of time” to restore the almost 8.5 million jobs lost in 2008 and 2009, Bernanke told the Senate Banking Committee.

The earliest point that Congress has allowed extended unemployment benefits to permanently lapse during an economic recovery was when the jobless rate fell to 7.4 percent, according to a Goldman Sachs report. The report said that happened in 1985 and 1978.

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

Last Updated: July 22, 2010 18:20 EDT