Tree Branch Economics

One trouble with government programs is they debilitate people.  Recipients believe they are getting a benefit when, in effect, they are being harmed.  Time and time again, under the influence of a benevolent hand of government, otherwise able and intelligent people are immobilized.

Take unemployment benefits, for instance.  Millions of capable people, through no fault of their own, lost their jobs over the last half decade.  But what’s worse, because of this, they inadvertently became dependents of the state.

At first they may have been demoralized to be on the dole and eager to get off of it.  They went from jobless to state dependency by accident.  Overtime, however, they were disabled by the government’s administered benefits…they couldn’t escape.

Regrettably, many good accidental dependents were just dumped from their extended unemployment benefits.  In fact, it’s estimated that 1.3 million Americans lost unemployment benefits last Saturday when a federal emergency program started during the Great Recession expired.  Moreover, as the year progresses even more people will be hung out to dry…

“Failure to extend the program will affect 1.9 million people who are forecast to use up their state benefits in the first half of 2014 before they can find work, according to the White House,” reported Bloomberg.

The Road to Hell is Paved with Good Intentions

This, unfortunately, is how these things go.  Naturally, the program was first put in place to help people.  Who can fault Congress for that?

They thought they were doing something good.  In truth, they didn’t really know what they were doing.  For the road to hell is always paved with good intentions.

The moral hazards and unintended consequences of Congress’s actions were never considered.  Providing extended unemployment benefits was all they cared about.  No one bothered to ask if providing this relief would further contribute to the unemployment problem.

As Henry Hazlitt noted in his classic work Economics In One Lesson over 65-years ago, “relief will cause some men to not seek work at all, and will cause others to consider that they are in effect being asked to work not for the wage offered, but only for the difference between that wage and the relief payment.”

According to the Bureau of Labor Statistics, as of November 2013, the average duration of unemployment is 37.2 weeks.  We don’t know for sure, but we suppose this duration would be much shorter without extended benefits.  Perhaps we may soon find out…as 1.3 million people were just cutoff.

Tree Branch Economics

No doubt, growing a tree branch of mass dependency and then hacking it off is cruel and insulting.  Even a Congressional staffer would agree with this.  When it comes down to it many people would’ve been better off had they never received an extended benefits payment to begin with.

They may have had to downgrade their income and lifestyle initially to find a new job.  Nonetheless, by now, they’d have adjusted to their new reality and moved on.  Plus being gainfully employed would increase their morale.

Instead the safety net they thought they landed in turned out to be the hopper feed of a giant tree chipper.  Now, after years of unproductivity, they find themselves staring headfirst at rotating steel knives.  What we mean is they are about to be shredded.

In short, they’ve been out of the work force for an extended period.  Their skills are rusty.  They may need new training.  All things being equal, the person with the shorter unemployment gap in their resume will get the job.

Obviously, each case is unique.  Certainly, there’s no one size fits all – silver bullet – answer.  But we have an inkling that less intervention and fewer programs – like extended benefits or Obamacare – would be a good start.  At the very least, the great big mess of a problem that greeted millions last Saturday wouldn’t have happened.

Sincerely,

MN Gordon
for Economic Prism

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