–Will the “Super Committee” actually consider what deficit reduction will do to unemployment?

8 thoughts on “–Will the “Super Committee” actually consider what deficit reduction will do to unemployment?”

1. Text of the letter:

   Dear Representative Hensarling and Senator Murray,

   In the past several weeks, we have received sobering reports on the dismal state of our economy. Nearly one in ten Americans is out of work. One in six Americans lives in poverty. And worst of all, more than one in five of our children live in poverty. These numbers are unacceptable and illustrate an American Dream that is increasingly out of reach for millions of families. We must do more to focus our national agenda on job creation and restoring our middle class. With that goal in mind, we ask you to take steps to ensure that your deliberations about deficit reduction do not worsen, and hopefully improve the jobs picture.

   As many of us wrote last month, job creation should be a central priority of the Joint Select Committee on Deficit Reduction. The loss of jobs drives up our deficit through loss of tax revenue and an increased burden on government-funded safety-net services. Of course, high rates of sustained unemployment and increased poverty have many other serious negative effects on the economy and on individual families, both short-term and long-term. Therefore, whether one’s goal is reducing unemployment or reducing the budget deficit, there should be no higher economic priority for Congress than job creation.

   Simply put, putting people back to work will help get our debt under control and, therefore, the Select Committee must make job creation a top priority as it weighs changes to federal spending and revenues.

   To accomplish this objective, we request that the Select Committee adopt two principles: first, that each proposed recommendation be analyzed by the Congressional Budget Office to estimate the impact on employment. Most Americans believe that our top economic priority is job creation, and this information would provide the American public with a clear understanding of how the Select Committee’s recommendations will affect their communities and their livelihoods.

   Second, the Committee should adopt a “First Do No Harm” standard – at a minimum, its recommendations should not result in any net job loss and, ideally, that they maximize new job creation while meeting the deficit reduction goals.

   In the coming months, your Select Committee will be considering a wide range of proposals with far-reaching consequences on our nation’s economy. We understand that Democrats and Republicans have very different views of what the best strategies are for promoting economic growth and are deliberately refraining in this letter from urging the Select Committee to consider those policies we think would be most effective. Instead, we are simply asking that the Select Committee take steps to ensure that it, and the public, have an independent estimate of the impact of its proposals on job creation, so that the economic effects of its deliberations are fully understood.

   Over the August work period, we heard again and again how Americans want to get back to work, families want to regain lost ground, and folks just want the opportunity to succeed as their parents did and their parents before them. It is our duty to work to expand, rather than diminish, that opportunity. It should be the priority of the Select Committee. We appreciate the complexity of the task you face and hope that you can develop recommendations that strengthen our economy and create jobs.

   Sincerely,

   cc: Members, Joint Select Committee on Deficit Reduction

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2. CBS evening news, 9/25/11:

   Senate Majority Leader Harry Reid wonder openly recently if Republicans want the government to shut down.

   “Do they want FEMA to close?” Reid asked.

   Democrats insist disaster relief should come without strings, while Republicans say you can’t ignore the deficit.

   “What’s at issue is whether we are going to add to the debt or not,” said Senate Minority Leader Mitch McConnell.

   Yep, that’s the issue. Not the fate of the victims of floods, hurricanes, tornados, fires, etc. No, who cares about them. The Tea/Republican issue is the debt. Remember that if ever you are hit by a natural disaster and are praying for the government to help you.

   You come last.

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3. I think you would agree with Warren Mosely that deficit spending to build the Panama Canal raises output and employment, and deficit spending to blow it up lowers output and employment.

   What if we lowered spending by eliminating the blowing up part, for instance the burning of our food in our gas tanks (corn-based ethanol subsidies)? Would that not help us, and increase employment (lower food costs would act just like a tax cut) while lowering the deficit?

   Ok, that’s one, you say. Perhaps there are other things that are just as destructive that we can eliminate. Maybe we can allow imported ethanol from South American sugar cane? Maybe the committee can come up with a regulation or two that are stifling innovation and productivity?

   I think the committee should postulate that anything good they do will cause economic growth, and raise tax revenues, thus reducing the deficit. Whether that good comes from more helpful spending or from less destructive spending. The government itself calculates that we spend billions of hours each year trying to comply with the income tax code. There’s some low-hanging fruit, I think.

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4. Warren said that?? Wow!

   Spending dollars to build the Panama Canal increases employment to the degree U.S. workers are used, and increases GDP to the degree U.S. facilities are used. The same would be true of blowing up the Panama Canal.

   In short, the deficit spending that adds dollars to the U.S. economy benefits the U.S. economy, and the dollars that go overseas do not.

   Rodger Malcolm Mitchell

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   1. OK, then let it be the Empire State Building instead of the Panama Canal. (I think when the quote was first uttered, we had a 99-year lease on the property, so it was not really “overseas”.) Should we be blowing up our buildings, so that we can “add dollars to the economy” by rebuilding them? Maybe we should blow up some empty suburbs, so as to raise the price of housing back to 2007 levels?

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      1. John, you mean does rebuilding a road, by first digging it up, stimulate the economy?

         O.K., I suspect you are trying to prove me wrong, so I’ll help you. Let’s say we blow up a perfectly good, brand new, federal government building, which the federal government rebuilds at a cost of $1 billion, i.e. it pays workers and materials suppliers $1 billion. Would this stimulate the economy? The answer is, “Yes.”

         After the rebuilding is completed, we would have a perfectly good, brand new, federal government building and the economy would have an additional $1 billion.

         This would not be true of state and local government buildings, as the states and local governments are monetarily non-sovereign.

         Rodger Malcolm Mitchell

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   2. The broken window fallacy was first expressed by the great French economist, Frederic Bastiat. Bastiat used the parable of a broken window to point out why destruction doesn’t benefit the economy.

      In Bastiat’s tale, a man’s son breaks a pane of glass, meaning the man will have to pay to replace it. The onlookers consider the situation and decide that the boy has actually done the community a service because his father will have to pay the glazier (window repair man) to replace the broken pane. The glazier will then presumably spend the extra money on something else, jump-starting the local economy.

      Read more: http://www.investopedia.com/ask/answers/08/broken-window-fallacy.asp#ixzz1ZqWUTrf1

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5. John, the great French economist Frederic Bastiat was talking about a monetarily non-sovereign entity, the father, whose spending merely transfers money. This is completely different from our Monetarily Sovereign government, whose spending creates money.

   The writer of the article also did not understand that difference.

   Rodger Malcolm Mitchell

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