Broken Politics and Bankrupt Economics on Display

by J. D. Foster

Arianna Huffington’s indignation is half right, for once. She’s right to call it a “terrible calamity” that millions of Americans are facing the bleak prospect of indefinite joblessness. And she is right to be frustrated at a political system “incapable of doing the right thing.” But then she slips into Arianna’s fantasy land.

The immediate object of Arianna’s distress is Congress’s inability to extend welfare benefits for unemployed workers. Having long since exhausted the insurance element of the program, and despite clear evidence that these benefit payments delay economic recovery, it makes sense to extend them. As long as Obama and friends continue their anti-growth, anti-business policies, the unemployment rate will remain around 10 percent, and so unemployed workers have little hope of finding a job. Incapable of doing the right thing indeed!

Obama’s stimulus program has failed, as expected. Confidence in the future is a key to prosperity, yet Obama’s gush of announced policies — from Obamacare to higher taxes on small businesses to cap-and-tax — have businesses of all sizes so worried about the future that even his buddies in Big Business have begun to turn on him. And now, Congress and the White House are signaling they intend to raise taxes not just on the rich but on the middle class as well. What confidence can one have in these circumstances but that the calamity will continue?

In the face of such a bleak economic landscape, few would argue against extending the benefits, but Congress is also responding to the rational and growing national unease over deficit spending. Members are rightly demanding the legislation be offset with spending cuts elsewhere. Obama and friends think otherwise, and so the legislation — and the welfare benefits — languish.

The budget deficit is now so large, Arianna asks, what difference could a few more billions in spending make? It’s precisely that kind of thinking that got the deficit so high in the first place. Congress didn’t just pass a bill raising spending by a trillion dollars in a year. They did it a few billion at a time, the same way those who max out on their credit cards get into trouble.

Whether the benefits are ultimately extended or not makes a huge difference to those waiting on the benefits. But it will do nothing to offset the harm Obama’s policies are doing to the economy or the nation’s finances.

J. D. Foster is Norman B. Ture senior fellow in the economics of fiscal policy at the Heritage Foundation.