Friday, May 27, 2011

Deficit and Unemployment Linked

Even with America still facing an unemployment crisis -- the latest numbers continue pointing toward the narrative of a "jobless recovery" -- politicians in Washington and the media which covers them have instead focused on the deficit.

Whenever federal and state lawmakers argue against extending unemployment benefits, they often frame the argument in terms of the deficit. Instead of focusing on jobs, Congress (including a newly-elected Republican majority in the House) shifts its attention to matters related to the deficit.

The budget plan forwarded by Rep. Paul Ryan (R-Wisc.), which would replace Medicare with vouchers for seniors to purchase insurance from private companies, was introduced in an effort to rein in the deficit.

The debate over the Bush tax cuts that took place back in December was framed around the deficit -- because raising taxes (even on a small percentage of the population) would mean more revenue, which is half the federal budget formula.

Republicans' refusal to raise taxes -- and in some regard, their insistence upon lowering taxes even more -- has made the revenue portion of the deficit debate a dicey one.

The current debate over raising the debt ceiling, which is necessary by August to prevent the country from defaulting on its debts and likely causing another recession, has been accentuated by Republican lawmakers requiring more spending cuts -- you guessed it -- in the name of deficit reduction.

Even debates over America's military action -- officially, we're only at war in Afghanistan (even though we still have troops in Iraq and we're doing who the hell knows what in Libya) -- are framed, in part, along the deficit. Proponents for ending America's wars argue that ending military action would save billions of dollars the country doesn't have.

They're not wrong.

But there's one thing that will help the deficit that almost no one is talking about: lowering the unemployment rate.

Remember what I said earlier about revenue being half the budget equation? Well, taxes are government revenue, and with almost 10 percent of American's working population not working, that's less taxable income available to local, state and federal governments.

It's really quite simple: put more people back to work, that means more people are earning paychecks -- which also means more people are paying taxes. A lower unemployment rate translates into more government revenue.

Think back to when President Clinton was in office; it's no coincidence that he left office with a massive budget surplus while he saw unemployment dip to 5.6 percent. His 1993 Economic Plan, which raised taxes on the wealthiest earners, also had a lot to do with it, but don't discount the simple formula of putting people to work and collecting taxes from their paychecks.

Look at your pay stub; though different states have different tax laws, everyone sees taxes taken out for federal, local and state governments, for Medicare/Medicaid and Social Security. If you don't collect a paycheck, you're not contributing tax dollars to those revenue streams.

If you're out of work for a lengthy period of time, you might even be taking money from the government, in the form of unemployment benefits. Also, debates over the solvency of Social Security and Medicare have been steeped, in part, on how many people are working, and thus paying taxes into those programs.

I'm not saying this is the only fix; putting people back to work will not solve all, or even most, of our problems. But if we're taking on the federal deficit, every option that doesn't unnecessarily burden the middle class and/or the elderly deserves consideration.

I realize that job-creating programs will require government spending -- and thus borrowing. Stimulating the economy in this way requires a certain amount of investment, and you know conservative deficit hawks will scream over it, like they scream over everything else.

But a short-term investment would go a long way toward putting Americans back to work (which was the intent behind the stimulus package, and an argument for why it should've been more robust); tax cuts for the wealthy do not create jobs, but economic stimulus does.

And the more people work, the more taxes they pay. Which reduces the deficit, all without cutting necessary programs.

See how simple that is?

No comments:

Post a Comment