Economic Mismanagement

Conservatives Vote to Torpedo Our Economy

Congress is now home for the July 4 holiday without extending unemployment benefits. The argument of those conservatives who filibustered the legislation is that it is more important to rein in federal deficits than it is to maintain the meager incomes of the unemployed so that they can remain part of America’s great consumer base and help employed Americans keep their own jobs.

Yet today’s new data from the Bureau of Labor Statistics shows that private-sector hiring continues at a tepid pace. Over the past three months, the economy has added an average of 119,000 private-sector jobs each month. At this pace, it will take the economy 66.4 months, or 5.5 years, to re-create all jobs lost (assuming 7.9 million deficit).

Why are these opponents of extended unemployment benefits willing to risk a double-dip recession? One reason is politics. Conservatives think if President Barack Obama is for something then they must be against it. While stopping aid to the unemployed may indeed end up helping conservatives rally their base in November, this does not seem to be the “easy” vote-getting strategy for independent voters who will be key to ultimate electoral success.

Conservatives also believe that the way to fix the economy is to “starve the beast,” the “beast” being the federal government that provides (among many other necessary services) unemployment insurance when Americans lose their jobs through no fault of their own. The economic logic behind this argument is that federal deficits will lead to future tax increases, which means Members of Congress should rein in government spending. Of course, these same conservatives mostly had no problem supporting record budget deficits when they controlled Congress and George W. Bush was president.

Indeed, the massive deficits we have now are due not just to the Great Recession, which began in the last year of the Bush presidency, but also to the failed conservative economic policies of the 2000s. Americans were told that tax cuts for the wealthiest would lead the wealthy to invest, which would lead to sustained economic growth and higher employment. That’s not what happened. Instead, the economic recovery from the last recession at the beginning of this century was the weakest recovery in the post World War II era in terms of investment growth and employment growth. Then, the failures of conservative economics delivered up the U.S. housing and global financial crises and the Great Recession.

Now, conservatives want to double down on their failed economics by cutting federal spending just when more government spending is needed to maintain much needed economic growth. Economics is not a mystical science. We have empirical evidence that points to one policy prescription being better than another. With unemployment continuing to hover near 10 percent, the weight of the evidence weighs heavily in favor of increased government spending. Extending long-term unemployment benefits is one of the policies with the biggest “bang for the buck,” alongside continued fiscal relief for states and localities when private sector spending and investment is not driving economic growth. Firing more workers when unemployment is so high and our economic recovery is so tentative is clearly counterproductive to the economic wellbeing of employed and unemployed Americans alike.

Government belt tightening when demand for goods and services in the economy is low will only pull our economy down an ugly path away from economic recovery. The time to tackle record federal deficits created by failed conservative policies is when our economy is clearly on the mend. The conservative counterargument is not based on facts. It is an ideological argument: Rich people make the world go around and it doesn’t matter for our economy if 1 in 10 is out of work.

But that’s just plain wrong. Consumers—yep, those of us who work for a living and need that paycheck—make up about 70 percent of the U.S. economy, as measured by gross domestic product. With higher unemployment and no long-term unemployment benefits, there are fewer consumers with cash in their pocket and there are more local businesses seeing sales dry up and fewer customers coming through their doors. No customers? Firms won’t hire. Instead, they will fire. It’s a vicious cycle downwards.

Having millions of long-term unemployed going without benefits will drive down private sector hiring and drive up the deficit. There are no two ways about this: without benefits, unemployed workers will have no cash in their pocket, will not be able to go to their local grocer for food and will have trouble paying their rent or mortgage. As a result, businesses will be seeing fewer customers this holiday weekend, which will stymie employer’s nascent thoughts of adding new workers or ramping up hours to the employees they have. On top of this, without benefits, the unemployed will owe even less in taxes, cutting back government revenues.

It’s time for conservatives in Congress to get serious about the threats to our economy.

Heather Boushey is a Senior Economist at the Center for American Progress.