The Unemployment Conondrum: Why the GOP is Dead Wrong

Those of us who consider ourselves progressive are still up in arms over the GOP-led filibuster that nixed a further extension of unemployment benefits. Let me attempt to decipher for you the GOPers position, which I will then poke holes in. Here goes.

The GOPer/Liberterian argument against continued unemployment benefits starts with the Austrian-school economic belief that a free-market economy will automatically produce full employment as long as workers are willing to be "flexible" in their wage demands (read: work for minimum wage). The reason unemployment is so high, they'll tell you, is that the government unemployment benefit is "subsidizing" the unemployed and encouraging them not to lower their wage demands. If you take away unemployment benefits, these unemployed workers will be forced to lower their wage demands in order to get a job, any job, in order to survive, thus "curing" the unemployment problem.

Does anyone see any problems with that? Oh, well, I guess I see a few. 

Taking workers who had a good paying job and sticking them in low-paying service sector jobs at the nearest McDonald's or Five Guys is no solution to our economic problems. Why not? Couple of reasons:

• Chances are these workers who used to have good paying jobs have debt payments based on their old income and not their new income. Since working at Mickey D's isn't likely to pay them enough to continue making their debt payments, chances are they will default. Thus causing our still-recovering financial institutions more grief, leading to fewer loans to small businesses and less economic growth.
  
• Falling wages like this is a recipe for deflation, because it leads to fewer dollars circulating in the economy (people have less to spend). If inflation is the kid brother who's had a few scrapes with the law, deflation is the truly mean older brother who's going to kill someone someday. Deflation happens when many goods are out there chasing fewer dollars. The result? Declining prices. Declining prices is a recipe for economic disaster because it encourages people NOT to spend money (why buy something today if it will be cheaper tomorrow?). When money stops circulating in the economy because people are holding out to purchase ever-cheaper goods and services, that's when Depression begins.
  
• With near-zero interest rates already, our government will have no way to pull us out of a Depression short of another fiscal stimulus package that our already high deficit makes us ill-equipped to afford. 
• Let alone, the human suffering (increased health problems, stress breaking up marriages and families, etc. Ever wonder why domestic violence increases during recessions? But I digress) that results from people not only losing their jobs but being cut off from aid by their government. (But then again, when have GOPers ever given two shits about human suffering?)

So, as someone who is employed and has spent the last 12 months busting my ass for my employer to avoid falling victim to the ax, I can see why some people resent seeing their tax dollars spent to provide these benefits. I hope the above illustrates, however, why these benefits are essential part of our economic recovery. They should be extended. And if the extension has to add to the deficit, then so be it. It's a drop in the bucket compared to the costs of a Third Depression.

Just for the record though, I don't advocate adding the costs of this extension to the deficit. How would I pay for it? I'd immediately end the tax credit on the use of "black liquor" for energy by pulp mills.