As the money taken in from people continues to fall, the money spent by the government to provide a social safety net rises. The Social Security Administration spent almost $309 billion in the first five months of the government’s fiscal year. That is up $18 billion from the previous fiscal year. Money spent by Health and Human Services, which handles Medicare and Medicaid, was up more than $22 billion to $342 b
illion.

The CBO argues that a dollar given to the unemployed goes back into the economy quickly and therefore adds to GDP and perhaps the taxable income of some individuals and businesses.  Only Sophists believe that this system has any real long-term benefit. The government may pay the poor to spend, but that does little to help them find jobs.  If there are no more successful ways to help the unemployed, Congress would be better off passing legislation to create new housing for the unemployed and use the construction jobs created to put some Americans without employment back to work.

If there is any single thing that will help bring down federal deficits over the next several years and keep the nation’s debt from reaching the $20.3 trillion that the CBO forecasts for 2020, it is a sharp drop in the unemployment rate. An unemployment rate of 5%, the level where it was in mid-2005, would mean that seven or eight million people who are out of work now would have jobs. The GDP created by adding that number of jobs would take most of the burden off the Treasury to borrow money at an extraordinary and unsustainable pace. But, if wishes were horses, all the beggars would ride. The best minds in Washington and in the profession of economics have not been able to come up with a single substantial program to reverse the destruction of jobs over the last three years..

A look at the unemployment figures by state, the $140 billion unemployment benefits bill, and the February budget numbers makes one thing clear. Working Americans support almost 15 million unemployed Americans. The people who are working also help support Social Security, Medicare, and Medicaid which adds support of several tens of millions or more people to the burden. The jobless rate is not improving.  People who are out of work for extended periods need government support, and the aging population puts more pressure on the social safety net.

Ten years from now, if the situation worsens considerably, one American will be supporting all 300 million of the others.

Douglas A. McIntyre