Ronald Reagan said: “If you want more of something, subsidize it" That Apparently Includes Unemployment!

 Eight years ago I wrote a post titled:  Can A Nation Built By Giants Survive Nanny State Paternalism? The Numbers Don't Look Good...  In it I wrote:

“ Were the Americans who carved a nation out of a continent, who crisscrossed that continent with railroads, telephone lines and highways and who won two world wars so different than Americans today… Not based on DNA they weren’t. But that doesn’t mean they were the same. While the DNA of the American people today is no different than that of the people who invented the elevator or the light bulb, the American people writ large certainly appear to be”.

The piece goes on to talk about the staggering changes in the makeup of the American workforce in terms of numbers of people actually working vs the number living off of government largesse.  I observed:  “If the record of the last 40 years were to be repeated over the next 40, in 2050 the country would have 260 million workers supporting 43 million people on disability and 450 million people on food stamps.”

It turns out that I was off by a few decades…

The last year saw what may turn out to be the most cataclysmic mutation of American society in our history.  Not only did the Democrats take Rahm Emanuel’s “Never let a crisis go to waste” maxim to heart, they put it on steroids.  They took a virus and turned into a catastrophe of epic proportions.

At the state level, from New York to Michigan to California, mini tyrants used the virus to strangle small business as the governors put their boots on the necks of their citizens.   At the national level Joe Biden has shifted government spending into overdrive. 

To put that spending into perspective, in March and April of 2020 when the pandemic was taking off and the United States lost 22 million jobs, president Trump signed a $2.2 trillion stimulus bill to keep the country on track.  He signed another $2 trillion over the next eight months as the economy found its footing and recovered 12 million of those jobs.  In his three months in office, when the nation added more than 1.5 million jobs, with demand spiking and prices surging, Joe Biden has signed into law or proposed $8 Trillion in new spending. 

Spending $4 trillion of dollars that the government doesn’t have when the economy is in freefall with more than 20 million Americans losing their jobs may be defensible, but spending $8 trillion when the economy is starting to overheat is simply ludicrous.

The proof of the folly is all around.  Across the country businesses are finding it almost impossible to hire staff, and those who can are doing so at much higher costs than they would normally pay.  Why?  Government, of course.  Businesses have to compete with supplemental unemployment payments that in Mississippi, the state with the lowest unemployment benefits in the union, equals $535 per week ($235 + $300 supplemental) which works out to the equivalent of $13.37 an hour in a state where the minimum wage is $7.25.(Within the last few days a dozen states – including Mississippi - have decided to leave the federal unemployment benefits program.)   In Massachusetts, where the minimum wage is $13.50 the total unemployment benefit works out to the equivalent of $28.20.  This spike in labor costs is even worse than it sounds because as businesses struggle to find workers, the higher wages necessary to attract them drive an increase in prices, which in turn tamps down demand for their offerings in the first place.

This tragedy is particularly difficult for small businesses who have taken the brunt of the damage in this economic meltdown with in excess of 2 million closing up shop and almost 10 million not sure they will survive.  Large companies like Amazon, Home Depot, Wal Mart and others have not only survived the pandemic, they’ve thrived from it.  Sadly, small businesses, who have traditionally been the life’s blood of the American economy, have not been so fortunate.  While large businesses often have the finances or flexibility to deal with surging labor costs, small businesses rarely do.  And labor typically makes up a much bigger cost of operations for small companies than it does for large firms who often can harness technology, scale and outsourcing to minimize labor costs.  For restaurants, karate classess, beauty shops and most small businesses, labor is often the biggest expense and the primary vehicle through which they deliver their services.

What we have in 2021 is a continuation of the Emanuel maxim. Last year Democrats used it to lay the groundwork for stealing the election and now they’re using it to drive their fundamental socialist goal:  The destruction of American small business. 

Small businesses represent solutions, opportunity and most of all, individual freedom, all things Democrats despise because they don’t look to government for direction.  Big business on the other hand, as Coke, Delta, Disney and myriad others have recently demonstrated, can be counted on to pick up the Democrat standard and run with it, much like Wal Mart and McDonalds did when they supported the passage of Obamacare.

Beyond the businesses themselves, small businessmen and women are a problem for Democrats.  By definition they are entrepreneurs, people who want to build something, want to be in control of their destinies and as such lean towards smaller government and the GOP.  Given that the Democrat Party is the party of government largesse, of government regulation and ultimately, government control, a crisis that disproportionately harms small businesses while growing the power and influence of the state is seen by them as a win-win proposition.  Look no further than their collusion with the teacher’s unions on the opening of schools to understand that it’s not what’s good for citizens that’s important, but rather, what’s good for the party and their donors. 

All of this came into stark view last week when the news that the economy added a mere 266,000 jobs in April when the expectation was for over 1 million.  That number, when combined with the tidal wave of help wanted signs across the country clearly demonstrates that Americans are indeed motivated not to work. Joe Biden scoffed at such notions:  “Americans want to work” he said.  Maybe not:  Bank of America estimates that anyone who earned $32,000 before the pandemic can now get more from a combination of state and federal unemployment benefits. They are also allowed to claim benefits for up to 39 weeks - nearly a full year - whereas before, it was capped at 26 weeks. The average US salary in 2019 was $31,133.

Which brings us back to the notion of a nation built by giants.  For most of our history, Americans very much had a “can do” spirit.  They carved a nation out of forest, rock and through deserts while fighting the elements, Indians, the English, Spanish, Mexicans and even one another.  Americans built the Transcontinental Railroad in six years, the Golden Gate Bridge in four and the Empire State Building in 410 days. Today however, Democrats have Americans cowering in their homes, requiring masks on the chance they’re given permission to emerge and looking to the government for their incomes. The virus provided Democrats with a perfect storm of opportunity to finish what they started half a century ago, turning a nation of giants into a nation of vassals where life, liberty and dollars are doled out in exchange for supplication to the Democrat Party. Never let a crisis go to waste, indeed.

Barack Obama has turned the US economy into a Hollywood blockbuster. Unfortunately it's Thelma and Louise.

Have you ever seen one of those movies where a car is speeding towards a cliff and just before it heads over the edge the driver jumps out and the car flies into the abyss and maybe crashes and ignites into a ball of flame?

If you haven’t don’t worry, you’re about to live one… and unfortunately for you, you’re not the driver who escapes, you’re a passenger strapped in for the excitement. President Obama is the driver and the way he’s running his campaign, it looks like he’s getting ready to jump…

As you probably guessed, the car in this story is the United States economy. Everyone knows that the economy is… anemic to say the least. The unemployment rate, which is now down to 8.1% is so only because 2.2 million people have given up looking for work since Obama’s inauguration. If those people were still looking for work, if they had any expectation of actually finding a job, the unemployment rate would be 11%.

As bad as two million people being so discouraged that they quit looking for work altogether is, there are a pair of dangers right around the corner that may mushroom that number, and take millions of jobs with them.

The first has to do with taxes. Unless it’s fixed, in January 2013 the tax code is going to create what the Washington Post has christened Taxmageddon. Between the expiration of the Bush tax cuts, the beginning of the taxes within ObamaCare, and a variety of other tax changes, federal taxes are going to increase by a total of $500 billion next year. That means that the government is going to be sucking $500 billion out of the private sector, i.e. your pocket, to fund its turtle tunnels, green energy boondoggles and Las Vegas conventions. To put that amount in perspective, that $500 billion you will no longer have to spend is more than the revenues of Apple, Target, Coke, Disney, McDonalds and Procter & Gamble combined! Now imagine removing that much activity out of the economy… That shouldn’t have much of an impact on jobs.

Would you rather keep that $1,600 (per person) tax hike and spend it as you like on goods and services that benefit you and your family, or would you rather send it to Washington so that the borg can spend it on things like National Public Radio, wealth redistribution schemes and Amtrak? Unfortunately for us we already know what Barack Obama thinks about that.

The second bomb the country is facing is particularly troubling because the danger is so obvious. Why is it obvious? Because we’re still licking our wounds from a mini version of the same problem: the housing crisis driven recession. Although the fundamental cause of the economic meltdown was government intervention in the housing market, the proximate cause was the sub-prime mortgages. Many of those mortgages were of the variable rate type where borrowers received a low introductory rate that would adjust (usually upward) over a period of time or in some cases, abruptly. When rates were low everything was peachy and consumers were purchasing houses at record numbers while investors were borrowing to buy investment properties. The markets were humming along.

Then everything hit a wall. Interest rates jumped, borrowers were no longer able to pay their mortgages, property values plummeted, banks collapsed, and the economy staggered into the “Great Recession”. We were told we were on the brink of a financial meltdown on par with the financial collapse of 1929 and civilization might not survive. Five years later we are limping along, but at least the world didn’t end.

Unfortunately for you and me, Barack Obama has not been smart enough to learn from that recent history. Over the last three years he has piled a total of $5 trillion in new debt on the shoulders of the American people. As bad as that is, that’s not the worst part of it! The greater danger is that virtually every dollar of that new debt is in the form of short term notes. The administration chose this route because, like the homebuyers, they get a great low rate. A two year note today carries a .03% interest rate while a ten year would carry a 2% rate. The problem is, when interest rates spike, all that debt will have to be refinanced, likely at the much higher rates. As an example of the impact of higher rates, consider this: If the government were today paying the 5% it was paying a mere 5 years ago the interest payments alone would be an additional $400 billion a year, almost as much as they will spend on the whole of Medicare this year. That would be like removing from the economy the revenue of Ford, Dow Chemical, Kellogg’s, Google, GAP, the NFL and Microsoft as well. A rate jump from .03% to 5%? No way, that’s not possible. Really? In the two years between January 1978 and January 1980 interest rates jumped a total of 14%, from 6% to 20%. Imagine what $10 trillion financed at 20% might look like!

Barack Obama has set the United States on a Thelma and Louise course, but likely won’t be in the driver’s seat when we actually leave terra firma. Unfortunately for Mitt Romney, the pain that Obama has guaranteed us will likely occur on his watch and there may not be much he can do to avoid it. Indeed, unbelievably, it has the potential to make the current disaster of a presidency look relatively prosperous in comparison.

If he recognizes this in advance, Romney will have the opportunity to steel the American people for the maelstrom ahead while giving them a reason to expect they will get better. That is after all what real leaders do: They prepare their countrymen to persevere through difficult times without needing a scapegoat to make their case; they inspire their citizens to pick themselves up, dust themselves off and go forward to build the prosperous future they seek; and finally, and perhaps most importantly, they seek to reduce the state’s power to frustrate and obstruct the citizenry’s ability to build that prosperous future. Now that’s an action movie I’d like to see.

Imagine if Barack Obama gave you the $5,000 a year you're on the hook for...

I’m a huge fan of lotteries. It is one of the few taxes that citizens pay willingly. Spending a dollar for the prospect of winning a hundred million is kind of fun. And the fact that the state’s provide the fig leaf of responsibility by suggesting all funds go to support education makes players feel like they are doing their part to support the kids… Imagine, a way of taxing people that is actually voluntary!

Unfortunately however, most taxes are anything but voluntary, particularly those levied by the federal government. In 2011 the federal government took in $2.3 trillion in taxes. Not only did all of that get spent, but about $1.4 trillion more. And now Barack Obama is in charge of the spending machine. In the three years he has been President, Obama has spent over $11 trillion. That includes not only the $6.6 trillion Uncle Sam took in in taxes, but an additional $4.6 trillion that has been borrowed on your behalf, or at least for which you have the responsibility to repay. If we split that sum up amongst every one of the 310 million people in the country that would mean that Barack Obama has racked up $15,300 in debt on behalf of every American… in a mere three years.

I’d like to give that $4.6 trillion sinkhole a little perspective. Imagine that instead of that money going to failed green jobs scam companies like Solyndra or to university research departments to play World of Warcraft, something completely different happened. Imagine that on January 20, 2009 Barack Obama had knocked on your door, teleprompter in hand, and said “(Insert taxpayer’s name here) I’d like to thank you for giving me the opportunity to be your President. And to show my gratitude I’d like to give you $5,000 a year each of the next three years. Now, you’ll have to pay it back of course, but I’ll spread the payments over 30 years and give you an interest rate of about zero.” You think to yourself “If I don’t take the deal he’s just going to barrow it in my name and spend it on poetry readings or some such thing.” Deciding you could come up with much better places to spend the money, you respond “Thank you Mr. President. I’ll take the checks.”

Wow. He gives you the check. Now you have a $5,000 you didn’t have the day before. You start dreaming…”What am I going to spend my new found money on?” Well, if you were an average driver, who uses approximately 700 gallons of gas a year, you could pay for gasoline for the year and still have about $3,000 left over. You could then spend $720 on clothes, $1,000 on entertainment and still have enough left over to cover half of your healthcare expenditures. “Not bad” you think.

Now of course, that is just one $5,000 check. Given that the average American home has 2.6 people in it, the President quickly takes the $5,000 check back and gives you a $13,000 family sized check instead. You think “Wow, almost $40,000 over three years! Now that’s some serious cash!” At $13,000 the government just covered more than 80% of the total cost of what the average American family spends on housing. That’s pretty nice. At a rate that is lower than your mortgage as well. “This is going to be great” you tell yourself.

Then, suddenly, just as the President is about to leave you stop dreaming and start thinking about the big picture. “Mr. President! Wait! $13,000 a year for my family would be nice, God knows we could use it, but I don’t want to bankrupt the country or close down the government or endanger the national defense.” “Good citizen” President Obama calls you, “Don’t worry about that, we’ll make do with the just the $2.2 trillion or so we take in in taxes annually, which is, exactly what we spent way back in the ancient period known as 2004.” - remember this is a dream.

The wheels start turning in your mind… How different is your life in 2009 relative to 2004, and how much did a bigger government have to do with making it better or worse? Recognizing that the growth in government didn’t do much to make life any better over that time, you decide you can indeed live with a government budget circa 2004. “Ok, Mr. President, never mind, I’ll keep the money! Thank you!”

Of course, that was all a dream. Unfortunately for you – and the rest of America – you are apparently too stupid to know what to do with your own money, or in this case, the money the government borrows but forces you to pay back. As such, no mortgage payments for you. No gas money, movie money, no check to cover your family’s annual food and insurance bills combined. No, unfortunately, while you are indeed on the hook for the money, guys like Barack Obama, Harry Reid and Barney Frank get to decide where all that money (and much more) goes…

Fundamentally that is the problem. And it’s not just money. Nor is it just the federal government. Increasingly it’s all levels of government and it’s seemingly about everything. Rather than parents being responsible for their kid’s fitness, schools have to ban burgers and pizza. Rather than drivers being able to purchase the kinds of vehicles they want, the government mandates auto companies sell cars no one wants and forces drivers to put inflation spurring ethanol into them. Rather than consumers and markets deciding what banks, and energy companies and health insurance companies should succeed, the government sticks its nose in virtually everywhere at almost every turn.

At the end of the day, few people could or would run their lives the same way the government runs the country – and unfortunately running the country is exactly what governments try and do. Fantasy budgeting and accounting, a distinct lack of accountability, a nonexistent correlation between success and continued funding, and a Pollyanna notion that all human problems and foibles can be obviated by government fiat.

Whether we get another four years of Barack Obama (God help us…) or a first term of one of the big government “conservatives” currently vying for the GOP nomination, voters should understand that the deficits and the regulation creep and the basic suffocation of the capitalist system that made America great will not be put asunder until we nominate and elect a President who:

1. Recognizes that the power of the federal government is constrained by the Constitution, particularly the 10th Amendment;
2. Understands that role of government is to do only those things which citizens cannot do themselves and nothing more;
3. Has the intelligence to know where the line between the two is;
4. Has the courage to tell voters to begin acting accordingly.

That doesn’t sound like too difficult a task. One wonders why the GOP can’t seem to figure it out.