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Michelle Malkin - Generous unemployment benefit kills jobs

Being a San Francisco liberal means never having to say you're sorry. Or wrong. Take Nancy Pelosi, please.

Five years ago, California's genius Bay Area Democrat declared that government unemployment checks generate job growth. Yes, really. "Let me say about unemployment insurance," she told reporters, "this is one of the biggest stimuluses (sic) to our economy. Economists will tell you, this money is spent quickly. It injects demand into the economy and is job creating."

She babbled on: "It creates jobs faster than almost any other initiative you can name, because, again, it is money that is needed for families to survive, and it is spent. So it has a double benefit. It helps those who've lost their jobs, but it also is a job creator."

What Crazy-Cakes Pelosi failed to mention, however, is the long-established conclusion of labor economists from all parts of the political spectrum that extending unemployment insurance benefits prolongs unemployment. While she heralded the short-term effects on consumer spending, she ignored the blindingly obvious: outside the land of progressive make-believe, workers respond to incentives. Over the long term, subsidizing joblessness creates more of it.

I bring this all up because a new paper from the venerable, nonpartisan National Bureau of Economic Research concludes that the recent job gains Pelosi and the Democrats are now crowing about may be due to the very policy they fought so hard against: ending extended unemployment benefits.

"We find that a 1 percent drop in benefit duration leads to a statistically significant increase of employment by 0.0161 log points," the NBER economists reported. In practical terms, it means that "1.8 million additional jobs were created in 2014 due to the benefit cut." Take note: "Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized."

The jobs bump coincided with the expiration of the 99-week UI benefits extension passed as part of the Obama stimulus package. Remember: laid-off workers were already collecting up to 79 weeks of unemployment in half of the states before the last extension. Democrats were pushing for yet another 13-week extension that would have cost tens of billions of dollars more. The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year.
Remarkably, the NBER analysis attributed "61 percent of the aggregate employment growth in 2014" to the congressional cutoff in unemployment benefits at the end of 2013. Here's the NBER team's bottom line for Pelosi and her fellow unemployment benefits cheerleaders: "The findings in this paper imply that the negative effects of unemployment benefit extensions on employment far outweigh the potential stimulative effects often ascribed to this policy."

This vindication comes after a hyperbolic campaign by Democrats accusing Republicans of "meanness" and "obstruction" for opposing "temporary" unemployment benefits that have become enshrined permanently.

But it's not just partisan hacks in Washington who've so falsely demonized those opposed to endless unemployment checks as a "job creation" vehicle. During the contentious debate over extending UI checks as part of the Obama stimulus in 2009, I argued on an ABC "This Week with George Stephanopoulos" panel, "If you put enough government cheese in front of people, they are just going to keep eating it." Atlanta Journal-Constitution columnist Cynthia Tucker took offense, mischaracterizing standard economic arguments for moral judgment. "Does the right really believe the unemployed are lazy?" she wailed.

The left-leaning journalism outfit at PolitiFact jumped on board, rating my 100 percent-true reference to decades of labor economics literature on UI's impact on joblessness "half-true". And the George Soros-funded hitmen of Media Matters called me and several other conservatives "reality"-deniers for stating the bloody obvious about UI's warped incentives — even though their favorite "progressive" economist Paul Krugman acknowledged that "everyone agrees that really generous unemployment benefits, by reducing the incentive to seek jobs, can raise the NAIRU" (the minimum rate of unemployment consistent with a stable inflation rate).

The politicians posing as economy-healers and the political operatives posing as journalists will no doubt find clever ways to slice, dice and explain away the latest NBER findings. But this simple truth endures: Government dependency doesn't "create" jobs. It kills them.

(Syndicated columnist Michelle Malkin is the daughter of Filipino Immigrants. She was born in Philadelphia, raised in southern New Jersey and now lives with her husband and daughter in Colorado. Her weekly column is carried by more than 100 newspapers.)

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Mr. Hoyt apparently doesn't see correlation between wages & prices

To The Daily Sun,

Your letter writer, Mr. Jon Hoyt of Plymouth, appears to be under the impression that there is a free lunch. I thought that all intelligent adults knew that this is not possible. If I were to take Mr. Hoyt to lunch and pay for his meal, he would get fed at no cost to himself, but the meal would not be free. It would have been paid for by someone else (me). If he truly believes that such a lunch would be free then he is either in denial or ignorant of basic economics.

Everything has to be paid for by someone. When President Obama announces "free" college education and "free pre-K" (a euphemism for free day care) those things may be "free" to those who avail themselves of these freebies, but they will be paid for by other people (taxpayers). Mr. Hoyt likes to say "government" but that word is actually a euphemism for "taxpayers".

As a taxpayer, I don't have a problem in helping support the very old or the very young or those who are truly physically or mentally disabled. However, as a single person who worked full-time for 53 years and now has the amazing sum of $972 a month in Social Security to live on (which I paid for all those years), I cringe whenever I encounter a younger person who has never worked but is living rent free, with free medical benefits and the opportunity to go to school for free.

Mr. Hoyt also claims that nothing has been done to prevent U.S. citizens from "hiding" money in offshore accounts. Nothing could be further from the truth.

In the last few years, the U.S. government has brought in stringent laws that make it extremely difficult, if not impossible, for U.S. citizens to benefit from investing overseas. In years gone by, income that was earned overseas by U.S. citizens was subject to the taxes of the country in which it was earned. Now all income earned by U.S. citizens anywhere in the world, is subject to taxation by the IRS. In addition, the U.S. government now requires that foreign banks handling money for U.S. citizens report those dealings to the IRS or face punitive fines. (Several Swiss banks have recently paid fines in the billions of dollars for handling the accounts of U.S. citizens and not divulging them to the U.S. government.) It has become extremely difficult for U.S. citizens to have offshore accounts and many former tax havens such as Switzerland, Luxembourg and Panama will only handle huge accounts (in the hundreds of millions) because of the expense involved in handling smaller amounts. (Read the book "Where to Stash Your Cash Legally" by Robert E. Bauman JD, a former Senator for Maryland.)

Truth be told, for U.S. citizens it is impossible to hide money. Unless someone renounces their U.S. citizenship, and moves abroad, any income they earn, anywhere in the world, will be taxed by the IRS. The reason for these extreme actions is because our government is currently bringing in about $5 billion a day in taxes but spending $11 billion. They are desperate for money and will apparently go to extreme lengths to get it. Apparently, they have decided that income earned by U.S. citizens belongs to the U.S. government and they are entitled to take as much of it as they see fit.

Mr. Hoyt, like so many people who think as he does, apparently does not see any correlation between wages and prices. As someone who worked two jobs to put myself and my husband through college I know how hard it is. (After my divorce I had to work three jobs to support myself and my children.) But paying unskilled entry-level people more than they deserve does a major disservice to all those who strive to better themselves. If there is no incentive to strive, most (but, fortunately, not all) people won't strive any harder to achieve better than minimum wage.

From experience I can tell you that in Australia, where minimum wage is approximately $16 an hour, a breakfast sandwich costs about $12 (as opposed to $4 here). I hear Americans all the time complaining about how expensive it is to travel in Europe. In Switzerland, where there isn't actually an official minimum wage, just a recommended minimum, it's hard to find anyone who earns less than about $50,000 a year. But a 6-ounce cup of coffee costs about $6.50 in U.S. money, and a plain salad works out to about $15 U.S. Anyone who does not see the correlation between wages and prices is living in Cloud Cuckoo Land. Every time the government promises a new "freebie" it means that those of us who are not benefiting from it are paying for it.

Anyone with a knowledge of history knows that in the French and Russian revolutions, well-to-do and aristocratic people were butchered and their property confiscated, supposedly to benefit the lower echelons of society. The result in France was that there was another revolution in 1830, and in the case of Russia, (USSR) Stalin instituted programs that caused people to be murdered in the millions, to reduce the population, because the government could not live up to its promise of a good life for all its citizens unless the population was lowered. And of course life was never good for Soviet citizens, unless they were in the ruling class.

Every time the government hands out a "freebie" somebody's taxes increase. Mr. Hoyt apparently doesn't see that, or else he thinks we are all as wealthy as he is and a few more thousand dollars a year in taxes won't be a problem.

Adam Smith was right when he stated that wealth has to be created. Robbing the rich to help the poor has no long term benefits. The government cannot continue to raise taxes ad infinitum, on those who are earning to support those who are not.

Unlike Mr. Hoyt, I do not want to see Senator Ayotte defeated in the next election. Although I do not see eye-to-eye with her on some issues, she at least has enough common sense to know how the world works.

There is no free lunch.

D.M. Williamson

Laconia

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