Mr. Rosen’s Broken Unemployment Window

The 405 club is unemployment blog I despise. The blog demonstrates the problem I have with the left while unemployed: The blog is more about how to get and stay on more entitlements than returning American workers to productive work. A recent post tells of Gregg Rosen, Co-Founder of the American 99’ers Union discusses the macroeconomic benefits of extending unemployment insurance. The problem is it based of an economic fallacy.

Mr Rosen’s argument is a classic broken window fallacy, If vandals broke bakers shop’s window, the baker will now have to purchase an new window and hire somebody to install it. Mr. Rosen would say the baker should be glad that the baker has stimulated the economy by replacing the window. What Mr. Rosen omits is the bake has to spend capital he could have used to hire workers or buy new equipment.

What he fails to realize is government doesn’t not produce wealth that is taking low cost raw materials, skill, and time to produce a product the sell for a higher price. Government can only consume and redistribute wealth produced by others. For example, an artist takes $50.00 of materials he paints a picture, sends it to a gallery, and sells it for $500.00. The trick is the artist must find a person who values the painting and will to trade for it. Money after all is just a measure of value and the means for trade. The artist takes the money and trades with others stimulating economy growth.

Now let’s inject unemployment and government entitlement. The person who bought the painting makes $4000 a month lost his job of no fault if his own, and government gives him $405 a week unemployment compensation. Since government cannot produce wealth, a 10% tax imposed on the artist and borrows the rest to pay unemployment compensation, but wait, there is overhead cost to the government, and government must collect or borrow $1157.00 to pay $405 in compensation. The result is the artist has less to spend, resulting in less economic stimulation.

Now in my example did not factor in  the Unemployment insurance is paid by  employer by a tax on payroll; the result is a disincentive  to hire and invest capital, meaning the person on unemployment has less of a chance to realize wealth building potential resulting less not more economy activity. Unemployment in this case is not a lifeline but a noose to hang oneself.

The solution is not tier V but restoring productivity by putting the unemployed back to work and not by more subsidies with other people’s money.  We need more focus on employment not more entitlements.

About Scatcatpdx

I am just an average Joe living in the People Republic of Portland Oregon. I was a Republican Precinct Person for Washington County, and campaign volunteer. Now I am a IDKWIA (I Don't Know What I Am). I am a bible believing Christian who is Calvinist and Reformed in my theology and Anglican in worship and practice. My other interest are music (classical and world, Progressive Trance), drawing, and Fury Fandom, I consider myself a furry lifestyler.. I am a Ham Radio operator.
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