Don't extend or increase federal jobless benefits. Instead, declare an 18-month federal tax holiday and drive unemployment down as a result of new jobs.
So argues Art Laffer, the influential Reagan-era economist and former adviser to that president. He is today chairman of Laffer Associates and co-author of the new book, “The End of Prosperity: How Higher Taxes Will Doom the Economy — If We Let It Happen.”
Cutting taxes across would push the jobless rate to 2.5 percent, he predicts.
The government has spent $3.6 trillion, a large fraction of total economic output, since 2007 with little to show for it, Laffer argues in The Wall Street Journal. The White House had predicted unemployment would fall to 7.3 percent by the third quarter of this year.
We won't come even close, Laffer insists. Unemployment is steady at 9.5 percent.
The U6 rate, which includes people who have given up looking or are underemployed, is at 16.5 percent.
“My suggestion would have been to take all $3.6 trillion and declare a federal tax holiday for 18 months,” Laffer says, cutting federal revenues by $2.4 trillion a year.
“Can you imagine where employment would be today? How does a 2.5 percent unemployment rate sound?”
As for jobs, federal spending is a zero sum game, or worse. Robbing Peter to pay Paul just moves money from one pocket to the other. It doesn't create any money at all, thus no new spending in the economy.
Jobless rates in the richest countries may have peaked, according to the OECD.
In the 31 member countries, there are now 47 million unemployed. The United States accounts for more than half of the jobs lost since 2007.
The unemployment rate for the rich-country club stands at 8.6 percent, about 17 million people out of work since the global financial crisis started.
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