Increasing the Universe of Jobs:

By:  Dale Weckbacher

Proverbs 16:3

Commit your work to the LORD, and then your plans will succeed.

NLT

Soon after I was married to my wife, I learned a valuable lesson from my father-in-law.  He worked construction as an operating engineer and had been out of work for almost a year.  This was during the Carter recession of the late seventies so he had a lot of company.  His unemployment benefits had run out and at this time in our country’s history, the Congress did not just keep extending the benefits.  We were discussing the unemployment rate and I commented that it was actually going down.  The lesson I learned from him was that he told me the government no longer counted him as unemployed since his benefits had run out and that that was why the rate was going down. 

My father-in-law only had an eighth grade education but he was wiser than most of the people leading our country today.  If he were alive today, he would be among those screaming that the recently released unemployment numbers are bogus.  Sure, the rate is going down but the reason is that there are almost 92 million able bodied people that have dropped out of the workforce.  (1)  If this unsustainable trend continues, we will have near zero unemployment but we will also have a vast majority of the country drawing a government check and a small minority paying taxes to support this burgeoning welfare state.  Eventually the system will collapse as the producers either quit producing or leave the country and there is no more money to support the welfare state. 

As the media and the Obama Administration tout how their policies are bringing down the unemployment rate, we must take a lesson from my wise father-in-law and educate our friends, family, and co-workers about how the rate is coming down due to a shrinking universe of jobs.  We can accomplish this by pointing out that there are an increasing number of people leaving the workforce, discouraged because they simply cannot find a job.  In fact, In December 2013, for every job created nearly five have left the workforce.  (1)  Anyone with any basic knowledge of math would understand that if this mathematical trend continues, the nation’s economy would collapse. 

We can also point people to the U6 unemployment number.  Typically, when the government releases the monthly unemployment numbers, the only number the media reports is the U3 number, which only counts those actively seeking work.  (2)  The number that more accurately reports those currently out of work is the U6 number, which includes those who are actively seeking work and those that would like to work but have given up looking.  (2)

When President Obama took office the U6 rate was 14.2 percent.  After trillions of dollars of bailouts and spending designed to create jobs and stimulate the economy, the U6 rate has only dropped to 13.1 percent.  (3)  I would say that the taxpayers are not getting their money’s worth. 

To truly stimulate the economy and increase the universe of jobs, we must quit current out of control government spending and stimulate the private sector of the economy through tax cuts and the easing of onerous regulations.  The private sector runs on capital, which is currently being used to pay high taxes and insure compliance with a growing number of regulations.  To truly expand our economy and the universe of jobs we must free up private capital so it can be used for business expansion and innovation. 

Mitt Romney, the Republican candidate for President in 2012 ran on a tax plan to cut taxes 20% across the board.  (4)  The belief was that more discretionary income in the hands of consumers would increase consumer spending.  In our economy that is driven by consumer spending, business revenues would increase and these businesses would need to expand to keep up with increasing demand.  Consumers would also demand new products spurring innovation. 

This is a short-term fix providing a quick, and much needed, stimulation to our currently stagnant economy.  However, we need a longer term fix to insure we do not go down the same road of out of control government spending and high taxes.  The longer-term fix to our economy involves fixing our government budget process by ending baseline budgeting and passing a balanced budget amendment.  After all individuals, families, and businesses all start at zero each year and have to balance their budgets, why not Uncle Sam. 

We then need to overhaul our tax code.  I say this as a tax preparer that earns money preparing taxes each year.  Even though simplification of the tax code would mean a reduction in my personal income, it would also mean a reduction of my personal taxes.  It would be nice to be able to have the same level of after tax income without having to endure the craziness of January 1 through April 15 each year. 

Our current progressive income tax code discourages achievement by strapping achievers with a higher tax rate.  Expanding the economy and increasing the universe of jobs requires replacing this progressive tax code with either a flat tax or a consumption tax.  This way people and businesses would be able to know their tax bill and how much income they have left after tax to either spend or invest. 

My father-in-law may have only had an eighth grade education but he was wise in that he had a great amount of commonsense.  He understood that someone out of work, without an income to support themselves and their families, was suffering even if the government no longer counted them as unemployed.  He knew that creating more jobs was the only real way to bring down unemployment not doctoring the numbers so that the rate appears to come down. 

Next Wednesday, we will begin looking at how we can change our tax code through either a flat tax or consumption tax. 

1. Harper, Daniel. Sessions: 'For Every One Job Added, Nearly 5 People Left the Workforce'. www.weeklystandard.com. [Online] The Weekly Standard, January 10, 2014. [Cited: January 14, 2014.] http://www.weeklystandard.com/blogs/sessions-every-one-job-added-nearly-5-people-left-workforce_774106.html#.

2. Filip, Jake. Your Ultimate Cheat Sheet To Unemployment Numbers. wallstcheatsheet.com. [Online] Wall Street Cheat Sheet, September 3, 2010. [Cited: January 14, 2014.] http://wallstcheatsheet.com/economy/your-ultimate-guide-to-unemployment-numbers.html/.

3. Portan Seven. Unemployment Rate - U6. portalseven.com. [Online] Portal Seven. [Cited: January 14, 2014.] http://portalseven.com/employment/unemployment_rate_u6.jsp.

4. Krugman, Paul. Do Tax Cuts Stimulate the Economy. economistsview.typeped.com. [Online] Economist's View, October 19, 2012. [Cited: January 14, 2014.] http://economistsview.typepad.com/economistsview/2012/10/do-tax-cuts-stimulate-the-economy.html.