Will lame-duck Democrats increase taxes and federal spending? Reply


By Tom Quiner

Tax rates are going up on all earners unless Democrats prevent it.

Republicans are 100% on board to prevent tax rates from going up, which is what will happen if the Bush tax cuts from 2001 and 2003 are allowed to expire.

Nancy Pelosi wants to increase rates  for America’s most-productive workers. She says she is against tax-cuts for the “rich,” but that is a less than honest way to characterize what will happen. She and her party, unless they prevent it, want to raise rates above what they have been for the last seven to nine years on the slice of earners who have the most ability to create jobs.

We have suffered through a steep recession. The economy has officially crawled out of recession, but job creation isn’t following suit as the unemployment rate continues to hover near ten percent.

Increasing taxes is a bad idea when the economy is shaky.

Democrats are also agitating to once again extend unemployment benefits. They want to do it in the name of compassion and economic growth.

We all understand and appreciate compassion when compassionate results are achieved. Unfortunately, the extension of these benefits actually delays job creation according to Larry Summers, Director of President Obama’s National Economic Council. In a 1995 paper, he said:

“Unemployment insurance lengthens unemployment spells.”

Did you notice how fast the unemployment rate shot up last year? It ballooned from 7.2% in January to 10.2% in October. What happened in between? For one, the administration’s so-called stimulus bill provided states with $40 billion to extend jobless benefits.

Mr. Summers himself admitted last July that:

“the unemployment rate over the recession has risen about 1 to 1.5 percentage points more than would normally be attributable to the contraction in GDP.”

In other words, the extension of unemployment benefits actually increased the unemployment rate. It acts as a drag on employment. As the Cato Institute’s Alan Reynolds puts it:

“When the government pays people 50 to 60 percent of their previous wage to stay home for a year or more, many of them do just that. When you subsidize something, you get more of it. Extending unemployment benefits from 26 to 79 weeks was guaranteed to leave many more people unemployed for many more months.”

Over at the Heritage Institute, James Sherk and Patrick Tyrrell quantified the long term damage done to one’s employment opportunities when unemployment benefits are extended:

“Many other researchers have come to the same conclusion. Researchers at Harvard found that extending unemployment insurance eligibility by 13 weeks increases by two weeks the amount of time that workers remain unemployed. Each additional week that the government extends UI benefits extends the length of time the average worker stays unemployed by 0.16 to 0.20 weeks. Since some workers find jobs in the first month of unemployment, extending UI means significantly longer periods of unemployment for those who do not start work quickly.”

If the compassionate result is for workers to return to gainful employment, then another extension of benefits is, in fact, devoid of compassion. And this extension is going to cost taxpayers another whopping $56.4 billion. How are Democrats going to pay for all of this mock-compassion?

Tax increases? That’s not compassionate either if it suppresses job creation.

Cuts in spending elsewhere in the budget? I’ll believe that one when I see it!

Lame-duck Democrats are faced with a sober choice: do they increase taxes and government spending even more by extending jobless benefits even if it hurts the people they’re trying to help?

Or do they hold the line on tax increases and government spending?

If compassionate results matter more than politics, let’s renew the Bush tax cuts and let’s hold the line on an extension of jobless benefits.

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