Pennies From Heaven? Why the Government Fails at Playing Good Samaritan

2010 December 9

"They need it."

That is becoming a well-nigh unanswerable argument in Washington today. Anytime programs are proposed that spend money on aid of some type, the final, clinching argument is usually some individual or segment of society that is putatively in need, and whose need (it is implied) can only be met by government. The inference is, it would be cruel and heartless not to spend the money to help those people. "They need it" -- case closed, Q.E.D.

Thus Jim McDermott could place extending unemployment benefits on a level with Christian charity, Christmas spirit, and the Good Samartan:

This is Christmas-time. We talk about Good Samaritans, the poor, the little baby Jesus in the cradle and all this stuff. And then we say to the unemployed we won't give you a check to feed your family. That's simply wrong.

In other words, if "they need it," and if government doesn't provide it, that's simply wrong.

No argument has yet been devised to convince the great mass of people that there's something wrong with that argument; it is the all-conquering Moloch of political debate today.

Obama works on the same assumption:

I’m not willing to see 2 million Americans who stand to lose their unemployment insurance at the end of this month be put in a situation where they might lose their home or their car or suffer some additional economic catastrophe.

The "they need it" argument is one reason a 13-month extension of unemployment "bennies" became part of the tax deal now working in Congress; there was never a chance benefits wouldn't be extended.

Creating Prosperity

But there's another rationale for extending benefits. Democrats say that extending unemployment benefits will boost the economy, by injecting demand into the system. MSNBC’s Richard Wolffe, just one of many talking heads making that claim, said this (on the CBS "Late Late Show," Dec. 8):

And in the meantime, unemployed people get their benefits, another extra $400 billion goes into the economy -- which everyone thinks is a good idea -- tax credits come in, and the middle class don't get screwed . . .

"Everyone" thinks it's a good idea? Nancy Pelosi does, anyway (if the word “think” can accurately be applied to her mental processes). In her December 1 press conference, she said this about extending unemployment benefits:

[It’s] the right thing to do to grow our economy. Economists tell us that unemployment insurance... returns $2 to the economy for every $1 spent. This is money that is needed by families to buy necessities. . . and immediately injects demand into the economy, creating jobs.

It certainly creates more deficits, but as for creating jobs – that is questionable. According to a Heritage Foundation study by Daniel Mitchell, PhD., “Economic theory does not automatically generate strong conclusions about the impact of government outlays on economic performance.” However, his ultimate conclusion is,

[A] large and growing government is not conducive to better economic performance. Indeed, reducing the size of government would lead to higher incomes and improve America’s competitiveness.

Government spending, Mitchell (and many others) says, can inhibit the economy for many reasons, including these:

The extraction cost. . . . The federal government cannot spend money without first taking that money from someone.

[I.e., when Wolffe says "another extra $400 billion goes into the economy," that's incomplete; the $400 billion is first sucked out of the economy, then blown back in.]

The displacement cost. Government spending displaces private-sector activity. Every dollar that the government spends necessarily means one less dollar in the productive sector of the economy. This dampens growth . . .
The behavioral subsidy cost. Government spending encourages destructive choices. . . . Unemployment insurance programs provide an incentive to remain unemployed. . . .

Extending benefits also will increase the federal deficit, a major economic problem right now.

If throwing billions of dollars into the economy is the key to recovery, why not just fly over various cities and dump money from a helicopter?

No, Democrats claim extending unemployment benefits will stimulate the economy because their whole orientation is redistribution, held to almost as a religious creed; they believe in bashing “the rich” as a moral obligation.

Moreover, ever since the New Deal, leftists have believed in massive government spending as a cure for any ailment in the economy. It’s a tried-and-untrue patent medicine for them. In reality, it never works and never has worked, but it just makes leftists feel so good, so virtuous, so morally superior to people with old-fashioned, religious-based morality.

The question may be asked: if 99 weeks of unemployment benefits aren’t enough, how many weeks will leftists think are enough? At what point does the argument “they need it” become ineffective? (Answer: no point.)

And if 35% of “rich people’s” income isn’t enough for government to take, how much is? At what point do Democrats stop excoriating the wealthy and demanding more of their money for those “who need it”? (Answer: no point.)