Massive Direct Hiring Pays for Itself.
This is from a CNN report from last December, so today’s total is at least $100 billion more, or a minimum of $534 billion. But this large number greatly understates the cost of unemployment.
Consider that the official number of unemployed people is roughly 14 million. The average household income is $49455, according to a recent USA Today article. From a back of the envelope calculation that means the nation is losing, annually, $700 billion in income in order of magnitude. While it’s losing this national income caused by unemployment taxpayers are also paying out and additional $100 billion for unemployment benefits. The total loss of income, and demand, is therefore a staggering $800 billion! Annually.
This doesn’t include additional billions of lost income from another 4-6 million in people who are underemployed and working fewer than a full workweek.
The cost to the nation’s annual economy is staggering. Most of it’s a total waste and total loss that cannot be recovered.
Meanwhile Congress does nothing to hire directly on much needed infrastructure projects, projects that would greatly reduce unemployment and thus dramatically increase the nation’s income–not to mention decades of productivity improvements such projects would produce. A similar positive effect would result from direct transfers to states and municipalities preserving existing public employment. Official figures are that almost 700,000 employees have been laid off at the local government level, increasing the unemployment rate by a full percent, while decreasing annual production by nearly 1% as well.
From one point of view, what we’re doing now is to pay people to consume more than they produce–a pretty good definition of what unemployment represents. What we should do instead is to pay people to produce more than they consume, which is precisely what we need to be doing to have our economy recover. And the best, most effective way to do that is for the government to hire directly. Although the private economy has produced 4.5 million jobs for the past couple years, it is not enough.
Too many households are still constrained from spending because their major asset, their home, is worth less than what they paid for. Millions of others are simply unemployed and have no productive work to restore their incomes for much of anything other than what unemployment and food benefits might offer. The private economy isn’t going to produce robust job growth until demand levels are restored to previous levels.
With demand destruction at $700 billion plus per year private firms simply cannot hire profitably. Funding that raises employment pays for itself many times over.
Tags: $700 billion annual cost of unemployment, CNN, Demand destruction, Direct Hiring Pays for Itself, household balance sheets bankrupt, USA Today
August 5th, 2012 at 3:30 pm
Maybe private firms would hire if govt would get off their back by throwing out Obama care, reducing taxes and regulations. We cannot spend our way out of Obama’s mess. Those jobs created are fewer than need to replace those leaving and comming on the work force….and it;s only3.5 million during the past 3 years.
August 5th, 2012 at 6:28 pm
There’s that ‘maybe’ word again. ‘Maybe’ if you give me more tax breaks and stop looking over my shoulder, then I can hire someone. Did that for 12 years and didn’t do diddly for employment or wage gains. In fact it produced the first decade on record where people were making more money going into it than they were coming out of it.
We need ‘guaranteed’ job hiring. Not empty promises.
August 5th, 2012 at 9:49 pm
The uneployment rate averaged below 5% during the Bush years and that’s not maybe. Guarantee that Dodd -Frank will be thrown out and guarantee taxes will not consume the buisness owners anfd you’ll see the unemployment rate fall to near full employment. Then you can afford ‘your infrustructure’.
August 6th, 2012 at 8:53 am
Neez, you can’t love jobs and at the same time hate job creators……those are the people who make over 200k per year. JFK in 1962 promoted a large tax cut for all in order to stimulate the economy and it did. Reagan brought the tax rate down from 70 percent plus to 28% and the economy took off. Increases of taxes onjy curbs expansion.
August 6th, 2012 at 9:49 pm
what we really need is a leader in the white house and some consistency in policy…. something we’ve been lacking. Far too many things are “up in the air” for big and small business’ to ignore. That’s bad governance. And the president has shown little leadership to show us how to get to where we need to go. Time for a change.
August 7th, 2012 at 12:49 pm
I agree, time for voters to admit the Tea Party hoodwinked them and throw the fakers out.
It takes 61 votes in the Senate to fart. The House hasn’t done anything for anybody for two years. They pass show bills no one in their right mind would approve. They vote 33 times to outlaw Obamacares. They scream cut the debt and hold us up to get big cuts in government, then run home to mommy when the Defense industry calls them up. They refuse to hire people directly to build infrastructure. They give everything that moves a tax cut and then holler ‘deficits!’
No wonder everyone hates Congress.
August 7th, 2012 at 12:53 pm
Just expiring the Bush tax cuts for the wealthy won’t do much to dent the deficit or long term debt, but it does help, especially if it’s used to put people back to work.
Romney’s tax plan is totally insane. It will put deficits into overdrive and, based upon the performance of the economy after the Bush tax cuts, will probably increase unemployment. Same old Bush era BS.
August 7th, 2012 at 12:59 pm
Romney and the GOP have to hope most of the voting public won’t know or understand the real impact of their so-called ‘policies.’
Based on Capt. and Counterpoint, looks like they might be right.
Problem is things will simply get worse for most Americans under Romney as wages are slashed, SS robbed to pay for tax cuts, Medicare neutered for all intents and purposes, big finance de-regulated so it can go blow itself up yet again, pollution controls tossed out the window, public education funding slashed, women’s rights trampled on—it’s a long list of horrible ideas that benefit no-one, not even the rich.
August 7th, 2012 at 1:10 pm
I wonder what Obama’s and Romney’s policies are for all the tax havens, many of them offshore, that are in today’s tax laws? Estimates are that upwards of $32 trillion is squirreled away with these tax avoidance schemes.
I’m pretty sure Romney can’t do anything about them. He uses them. Tax avoider in Chief. Read the book Treasure Islands.
http://treasureislands.org/
August 7th, 2012 at 1:12 pm
Plus, Wall Street is one of those treasure islands. Used mostly by drug kingpins and tyrants as they hoover up cash and put it offshore–in America.
August 7th, 2012 at 1:43 pm
capt., cutting taxes from these historically low rates won’t do much. If rates are high, then cutting them can be advisable. JFK cut the top marginal rate of 91% to 70%.
As for Reagan, from Wikipedia.
“The primary effect of the tax changes over the course of Reagan’s term in office was a change in the composition of tax revenue, towards payroll and new investment, and away from higher earners and capital gains on existing investments. Federal revenue share of GDP fell from 19.6% in fiscal 1981 to 17.3% in 1984, before rising back to 18.4% by fiscal year 1989. Personal income tax revenues fell during this period relative to GDP, while payroll tax revenues rose relative to GDP.[4] President Ronald Reagan’s 1981 cut in the top regular tax rate on unearned income reduced the maximum capital gains rate to only 20%–its lowest level since the Hoover administration.[10] This tax benefits the wealthy, however, in 1986 President Reagan set tax rates on capital gains at the same level as the rates on ordinary income like salaries and wages, with both topping out at 28 percent.[11]“
August 7th, 2012 at 1:46 pm
Reagan also closed some loopholes used by corporations and the wealthy. Notice that by 1989, federal revenue share had gone back up to 18.4%–within shouting distance of where it is high enough to produce surpluses.
We need to trim spending intelligently and we need to get federal revenue share close to, or at, 20%. Historically that’s where it’s normally been when the economy is healthy.
August 8th, 2012 at 10:31 am
Taxing the so called rich will bring 120 billion into the treasury. Not much reduction of the 5.4 trillion added to the debt in the past 3 years. This tax will also kill jobs.
August 8th, 2012 at 3:07 pm
Obama’s tax proposal would raise about $2.1 trillion over the next 10 years, according to Tax Policy Center.
http://www.taxpolicycenter.org/taxtopics/upload/2013-Budget-Analysis-FINAL-3.pdf
By the way, Romney says he’ll keep government at 20% of GDP. Problem there is that he says “trust me” when you ask him how to pay for it. Just like the Ryan budget proposal couldn’t really be scored either–all sorts of ‘trust me’ stuff asterisked. Apparently GOP has a new accounting method figured out. Like asking a snake oil salesman what’s really in the bottle. “Trust me.”
August 8th, 2012 at 9:25 pm
Sounds like your love Nancy Peloci”you won’t know whats in it until you pass it” I understand liberals like you get confused.
August 9th, 2012 at 4:38 pm
If you’re talking about the infrastructure spending, it’s pretty straightforward. About the jobs it would create, and about the income that it would create. Republicans just don’t want such a bill to pass under Obama. It’s totally political.
As for Romney and Ryan’s budgets, they are not widely understood yet. But those who study these things pretty much agree that they’re nonsense and not scorable. The only economists who support them are well known Republican activists who hope they hit the gravy train if Obama wins. Non political academics are very upset with this politicization of economics.
August 9th, 2012 at 4:39 pm
if Romney wins. not Obama.
August 9th, 2012 at 6:44 pm
Compare the republican budget with the dem budget, oh yeh that’s right ,Obama hasn’t produced a budget since he was elected. All the economists you favor are lefties, Krugman is just one example. Cut taxes on buisnesses, reduce regulations and rid us of Obamacare and the economy will take off and you can have your infrastructure(that is if their are enough people not working to work on it).
August 11th, 2012 at 11:49 am
Obama has produced budget proposals, and they are scored by the CBO. Just like the ACA is scored by the CBO. Just like his tax reforms are scored by the CBO.
Ryan’s budget isn’t even scorable. It’s a fraud. Mitt’s tax reforms aren’t scorable either. Another fraud.
I know you’re a ‘what me worry?’ kind of Republican fundamentalist, Capt., but I think we should be paying our bills, or at least have a scorable plan to do so.
As for what can or cannot pass, the GOP decided even before Obama took the oath of office that they would do everything they could to keep him from succeeding. So they never even considered compromise. And they still don’t.
Despite that unified opposition to all and everything, Obama still managed to get 30 million uninsured Americans some health care. Romney obviously thinks that’s too many people with health care, so the first thing he says he’ll do is take it away. Obama also got Dodd Frank passed aimed at making speculative behaviour by banks harder to do. Romney thinks the banks should repeat their speculation of the last decade, apparently, so he’ll get rid of Dodd Frank.
Look, I’m no chump. This has nothing to do with the common good. This is all about wealth and power. The GOP has most of the money, and now they want to preserve that money by owning the government. All the rest is just smoke and mirrors aimed at keeping the average voter in the dark about their real goals.
Nothing’s changed with the GOP since FDR said they are people ‘who consider the government an extension of their private affairs.’ Nothing has changed.
August 11th, 2012 at 1:50 pm
First, Obama had control of the total govt in 2008 with Peloci and Reid leading congress and what did we get? “What me worry” you bet your ass I’m worried, I’m worried that if we have 4 more years of the dems in control, the country we once knew will be gone and replaced by a total entitlement state. Dems are to party of gimmes and republicans are the party of doers. I see which party you stand for. The only budget proposed by Obama was voted down by the senate 100 to 0 and I wonder why. Even the dems thought it was a follie. Don’t speak of Dodd and Frank, they were the two that created this mess in the first place. As far as I’m concerned they both belong on death row since they single handedly killed our economy. You define common good as how much you can get for free, we are so very different my friend.