Bill Mitchell on cutting unemployment benefits – John Hermann
A very recent blog by Prof Bill Mitchell * has drawn attention to the stupidity and cruelty attached to the recent decision by the U.S. Congress to cut unemployment benefits. Here is the introduction to his well-argued article:
“Once upon a time when I was a postgraduate student and there were around ten unemployed for every registered vacancy in Australia, a professor at my university was waxing lyrical about the lazy unemployed and what they should do to get off the welfare list. He said – well if they really wanted to work they could go down to the municipal tip and scratch together some scrap wood and some old pram wheels and build a cart, then follow the milkman around each morning and collect the horse dung and start a garden fertiliser business.
“He wanted the unemployment benefit eliminated to get “these characters off their bums”. I remember the session vividly. That was his cure for the indolence of the unemployed. I put my hand up and said: “Two problems. First, the local council generally will not allow people to scour the tips for rubbish.
“Second, more importantly, the dairies now have trucks. The horse and cart milkmen were eliminated a few decades ago”. Much laughter followed. My relations with that professor soured a little more after that but the base (sourness) was already large so the percentage change was minimal.
“The same sort of idiocy is driving policy in the U.S. at present, with the U.S. Congress enforcing more than a million unemployed Americans (that is, about 12 per cent of the total officially unemployed) will lose their unemployment benefits this coming Saturday because U.S. politicians have decreed – against all the available evidence and research – that this cohort is lazy and that the dole is standing between them and jobs. “
Following Bill’s analysis of an impressive array of statistical economic data in support of his argument, he comes to the following conclusions:
“There is no validity in the supply-side case that mass unemployment is somehow something to do with the unemployed being lured into leisure by excessive unemployment benefits or some other reason.
“The evidence is consistent and strong – that the mass unemployment in the U.S. is the result of a systemic failure in that economy to produce enough jobs, which emerged as aggregate demand collapsed in early 2008.
“Since then the economy has been starved of spending because the private sector is unwilling to take risks (and is deleveraging) and the government sector is caught in a conservative web of mindlessness after initially, in the face of a total meltdown in 2008, providing enough fiscal stimulus to kick start the economy.
“It was a weak kick and the impacts are fading as the spending cuts widen. The elimination of unemployment benefits will not help this slowdown. “
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia.
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