Nov 23, 2009

22.1% Unemployment More Stimulus Equals More Unemployment

The "headline" (U-3) unemployment rate of 10.2% vastly understates the magnitude of the jobs crisis in America. John Williams' "Shadow Government Statistics" unemployment number for October is 22.1%. Williams estimates that we would have to create 22.6 million new jobs in order to get to "true" full employment. At $313,000 each, the private sector would have to invest an incremental $7.1 trillion to accomplish this.

If you divide the total real capital employed in the U.S. ("produced assets") by total employment, you get about $313,000. That is, for $313,000 in capital, the private economy can create one real, permanent, self-supporting job. In contrast, there are estimates that each of the jobs that the administration claims that "stimulus" has "created or saved" is costing about $1.2 million.

If so, this means that selling the bonds required to fund one temporary "stimulus" job will take enough capital out of the private sector to destroy four "real" jobs. This explains why, as the "stimulus" spending has ramped up, job losses have accelerated.

Unfortunately, the Administration, the mainstream media, and much of the economics profession are responding to the worsening unemployment with calls for even more "stimulus". This would compound the tragedy. Each $313,000 of bonds sold to fund the additional spending could be expected to extinguish one private sector job. In addition, we can expect that the next increment of stimulus would be even more wasteful than the first $787 billion. The "best" projects would have been included in the first stimulus bill.

Canceling the job-destroying "stimulus" program would be a good first step toward providing the private sector with the additional capital required to achieve full employment. However, this would provide only about 10% of the money required. The rest would have to be mobilized by increasing incentives for real savings and investment.

The two most effective measures toward this end would be to stabilize the dollar and to repeal the corporate income tax. The corporate income tax brought in only $138billion in FY2009. This amounts to less than 1% of GDP, and less than a fifth of the cost of the "stimulus" bill. Repealing it now would produce higher employment and higher Federal revenues within months.

I wonder what all these figures would look like if we figured in a repeal of all future income payments to Senators and Congressmen who are voted out for doing a indefensibly baneful job. If they are voted out and replaced isn't that like being fired? It would be different if they served well and retired after two terms, but the ones who clearly are inept or refuse to perform to the wishes of the constituants who voted them into a role of representing them should, not be rewarded. Instead they follow party lines and push through the administrations agenda, they follow their political party and forget about the job they were sent there to do and that is to voice the opinions of their State. If they are fired at election time, there ends their lifetime drain of future tax dollars. If they perform well and do their job for two terms, then receiving lifetime income and benefits is acceptable.(kinda) Just what are these numbers in terms of dollars we don't have for a job that borders on treason??? Put that money and future monies back toward working for the American People and easing our economic trauma. Becoming unemployed is a bitch and they should have to appreciate the same fate.

SocialSecurity Institute

1 comment:

  1. Term limits, and a much reduced "retirement plan" in terms of both money and the period of time they can collect it. That's what I think is fair. As far as the unemployment numbers, when did Gongress come up with the current formula to "spin" the truth? Can you imagine the response if Americans KNEW the real number? Great post!!


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