Republicans: A Party of Unemployment

From now until 2 November, the Republican party will be the party of
unemployment. The logic is straightforward: the more people who are
unemployed on election day, the better the prospects for Republicans in
the fall election. They expect, with good cause, that voters will hold
the Democrats responsible for the state of the economy. Therefore,
anything that the Republicans can do to make the economy worse between
now and then will help their election prospects.

While it may be
bad taste to accuse a major national political party of deliberately
wanting to throw people out of jobs, there is no other plausible
explanation for the Republicans' behaviour. They have balked at
supporting nearly every bill that had any serious hope of creating or
keeping jobs, most recently filibustering on bills that provided aid to
state and local governments and extending unemployment benefits. The
result of the Republicans' actions, unless they are reversed quickly,
is that hundreds of thousands more workers will be thrown out of work
by the mid-terms.

The story is straightforward. Nearly every
state and local government across the country is looking at large
budget shortfalls for their 2011 fiscal years, most of which begin on 1
July 2010. Since they are generally required by state constitutions or
local charters to balance their budgets, they will have no choice
except to raise taxes and/or make large cutbacks and lay off workers to
bring spending and revenue into line.

State and local governments
have cut their workforce by an average of 65,000 a month over the last
three months. Without substantial aid from the federal government, this
pace is likely to accelerate. The Republican agenda in blocking aid to the states may add another 300,000 people to the unemployment rolls by early November.

The blocking of extended unemployment benefits promises similar dividends. As Paul Krugman rightly notes this week,
unemployment benefits are not just about providing income support to
those who are out of work, they also provide a boost to the economy.
Since unemployed workers generally have little other than their
benefits to support themselves, this is money that will almost
immediately be spent. The benefits paid to workers are income to food
stores and other retail outlets.

Unemployment insurance provides
the sort of boost to demand that the economy desperately needs. That is
why neutral parties such as the congressional budget office or
economist Mark Zandi, a top adviser to John McCain's presidential bid, always list unemployment benefits as one of the best forms of stimulus.

Republicans
give two reasons for opposing benefits. First, they claim that benefits
discourage people from working. Second, they object that the Democrats'
proposal will add to the national debt.

On the first point there
is a considerable amount of economic research. Most indicates that in
periods when the economy is operating near its capacity, more generous
benefits may modestly increase the unemployment rate. However, they are
less likely to have that effect now. The reason is simple: the economy
does not have enough jobs. The latest data from the labour department
shows that there are five unemployed workers for every job opening.

In
this context, unemployment benefits may give some workers the option to
remain unemployed longer to find a job that better fits their skills,
but they are unlikely to affect the total number of unemployed. In
other words, a $300 weekly unemployment cheque may allow an experienced
teacher the luxury of looking for another teaching job, rather than
being forced to grab a job at Wal-Mart.

However, if the teacher
took the job at Wal-Mart, then this would simply displace a recent
high-school graduate who has no other job opportunities. That might be
a great turn of events in Republican-econ land, but it does not reduce
the overall unemployment rate, nor does it benefit the overall economy
in any obvious way.

The other argument the Republicans give is
that these bills would add to the national debt. For example, the
latest extension of unemployment benefits would have added $22bn to the
debt by the end of 2011. This means that the debt would be
$9,807,000,000 instead of $9,785,000,000 at the end of fiscal 2011, an
increase of the debt-to-GDP ratio from 65.3% to 65.4%.

It
is possible that Congressional Republicans, who were willing to vote
for hundreds of billions of dollars of war expenditures without paying
for them, or trillions of dollars of tax cuts without paying for them,
are actually concerned about this sort of increase in the national
debt. It is possible that this is true, but not very plausible.

The
more likely explanation is that the Republicans want to block anything
that can boost the economy and create jobs. Throwing people out of work
may not be pretty, but politics was never pretty, and it is getting
less so by the day.