Unemployment Implications!

Through an analysis of the issue of unemployment I have found that it is obvious that a failure to diminish unemployment will result in a swell of economical issues. Two of the big issues at this very moment, upon which unemployment is resting, are whether Congress will let the Bush Tax Cuts expire and whether they will extend unemployment benefits to the jobless. I will continue my post by explaining the implications which will arise if these issues are not discussed and resolved properly.

So what will happen if Congress allows the tax cuts to expire? If the cuts expire then the government gets more money in the short run. However, it is money taken out of the economy, so the economy can’t grow. So when the government spends the money, it’s all used up with no taxes coming in from a growing economy.  It’s the equivalent to giving me $2 now but if it was left in the economy to grow and crest jobs, the government would get $3 from being able to tax a bigger pool of money, even if that tax rate is lower. So overall the government actually gets more money when tax rates are lower. One of the main issues right now is whether we should tax the wealthier Americans as well.  I believe that everyone should be included in the tax cuts.  Middle and lower class families would spend their extra money that they receive from the cuts and the wealthy families would probably do the same.  The argument is that many wealthy Americans would not spend their extra money, but save it, ultimately doing nothing to spur the economy.  However, I believe that if we gave the wealthy Americans tax cuts, they would have more money to start or expand businesses and hire more people; that is what most wealthy Americans get their wealth from anyways, right?  Only selecting a certain group of citizens to receive these cuts would both create less jobs and cause less money to be pumped through our economy.

What will happen if congress does not extend unemployment benefits? Well, besides the fact that around 3.2 Americans would suffer from the lost benefits, it will also put a restraint on our economic growth. The point of unemployment benefits is to put money in the hands of people that cannot receive money from the private sector. Once money is handed over, the recipient spends it immediately to help support themselves or their family. Without these benefits, people can’t get paid, can’t spend, and the economy can’t prosper.

Some may say, “How can the extension of the Bush Tax Cuts and the extension of unemployment benefits go hand-in-hand?” Wouldn’t lower taxes only create less money for the government to provide for the benefits? Well that’s where I think spending cuts come in. The less money we spend on useless projects (refer to my “Theory on Unemployment” post), the more money the government will have to help those in need. Although there are several plans that the government has discussed to reduce unemployment, I believe that the extension of the Bush Tax Cuts and unemployment benefits are the two main goals that we need to focus on.