Unemployment Benefits Create Jobs! Huh?

Recently, Nancy Pelosi suggested that the best way to stimulate the economy is to extend jobless benefits to the unemployed. Her reasoning is that giving the unemployed some money will get them to spend some money, which in turn provides new business and therefore helps to create new jobs.

Ok, if that is the best way to stimulate the economy, why didn't we just take that $800 billion stimulus and give the unemployed one big chunk of cash? Or, triple their weekly benefits? Then the recession would be long gone!

This morning, Michigan AFL-CIO leader Mark Gaffney echoes this sentiment. But, he doesn't even bother to provide any evidence. He has the nerve to go on to say that all the Republicans want to do is provide the rich with undeserved tax cuts. Who the hell is he to say who deserves what?

Unfortunately, this is not how the economy works. Extending jobless benefits keeps some people from looking for work at low paying jobs. They keep looking for higher paying jobs while collecting these benefits. Since a $1 of tax dollars spent is a $1 taken away from the private sector to spend, no real growth will occur.

I've had a conversation today with a client who owns a HVAC contracting firm. He says business is still dead. There is no building going on, no major retrofitting of existing buildings, so there is no demand for his product. That suggests that the stimulus has not stimulated.

The bottom line is that the massive redistribution of wealth that has occurred in the last year with the stimulus and Obamacare has left the government with a huge pile of new debt on top of the old debt and a weak economy.

Time to rethink what works and what doesn't.