Friday, June 11, 2010

The Economy, Unemployment, and a little bit of Common Sense

On Thursday June 10th, I was able to take the knowledge that I had gained from the Bernanke hearing and expand upon it a bit more by attending a hearing on responding to long term unemployment held by the Ways and Means subcommittee on Income Security and Family Support. The opening statements were provided by Subcommittee Chairman Jim McDermott (D-WA) and Ranking Member John Linder (R-GA). The panel of witnesses was a compilation of economists from various universities and policy institutions such as, University of California at Berkeley and the Center for American Progress. In order of testimony, they were Dr. Lawrence Mishel, Dr. Heather Boushey, Dr. Michael Reich, Dr. Till Marco von Wachter, and Dr. Jason Taylor.
The first four witnesses provided very similar testimony although none of it was backed by conservative fiscal policy. One topic that was of great concern was the extension of unemployment benefits past 99 weeks. Mishel, Boushey, Reich, and von Wachter listed this extension as the #1 policy priority for Congress to enact. The only economist who disagreed with this was Dr. Taylor who insisted that deficit spending was actually counterproductive to helping the labor markets. He stated that “the multitrillion-dollar deficits to finance the stimulus as well as government bailout money from TARP have to be financed, and the possibility that the Federal Reserve would engage in inflationary financing of this new federal debt has clearly unnerved many investors”. Taylor’s viewpoint was clearly shared by Linder who, in his opening statements, stated “the evidence is mounting that so-called stimulus policies rammed through Congress are doing more harm than good”. The Republican Ranking Member elaborated saying “we need to stop doing what is not working…repeal the stimulus, stop the spending, force government to live within its means, and really help Americans get back to work.”
Other topics that would help Americans find and keep work were discussed. Boushey and von Wachter suggested implementing work sharing and unemployment services programs to help people retain jobs and help unemployed workers to find jobs. Mishel, Reich, and Boushey also expressed their support for Congress to pass the Local Jobs for America Act and extension of TANF funds. Because all of these measures would lead to deficit spending, Taylor disagreed with these proposals also. In his viewpoint, Dr. Taylor recommends stabilizing the markets to provide certainty to businesses so that they will produce more and hire more people. He also added that any more stimulus packages could send the message of government uncertainty which would again be counteractive to creating jobs. The last thing he suggested was for local governments to lower taxes. This in turn would reduce financial burden on individuals and companies to increase hiring rates.
In my viewpoint, I most agreed with Taylor and Linder’s philosophies. Common sense tells me that businessmen and women act when their markets are stable. To ask them to act with instability is the same as asking a doctor to perform surgery blindfolded. They cannot see where their companies are headed which creates anxiety and stress. Although I did not necessarily agree with every single witness’s ideas, I did genuinely admire their creative and academic thoughts on how to get our labor markets revitalized. It was very interesting for me as a pre-law student to see how economists think and solve problems. I feel like I understand a bit better the issues facing our economy and labor sectors now. Overall, this was a great learning experience for me, and I hope to have many more like it.

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