Along the Tracks

Friday, February 07, 2003

Smooth move, Mr. President

I won’t win many friends by saying this (I might even lose a few), but ... I told you so!

After the elections last November and on into December, when politicians were demanding that unemployment benefits be extended for all the people who were about to run out (right after Christmas, as I recall), I wrote that an extension would artificially maintain high unemployment rates, because people naturally accept money for not working as long as they can. Once a deadline appears, they have to go out and get a job, so they do - voila, unemployment falls.

I have never personally been laid off (fortunately), but have had many friends who have spent time on unemployment. Invariably - invariably - they followed this formula: An intensive search for “the perfect job” for about a month (occasionally successful), followed by four-and-a-half months of minimal searching. As the cutoff deadline approached, they all had a sudden attack of reality, then found and accepted “good enough” jobs (often jobs substantially better than their old ones). In cases where the government extended unemployment eligibility, it always - always - resulted in an extended stretch of unemployment for my friends until the benefits ran out. This may be anecdotal evidence, but it displays something liberals always ignore in their policy initiatives: human nature. Assuming the government is paying me enough to survive without working, why exactly should I look for a job? I am not criticizing those who follow the above pattern - I’m quite certain I’d follow it myself - merely observing it. Most of my friends actually accomplished a great deal during these extended jobless periods (house repair, writing, assisting parents, education, etc.). My point is they were not going to look for a job until they actually had to.

Bush was pretty shrewd on this one, quietly nixing any benefit extension until after the new year. Bush took a little heat on the issue, but it was hard for Democrats to burn him, since he said he favored the extension, but wanted it on his terms - and so Congress never agreed on anything. Once the deadline passed and “thousands lost their benefits,” it was safe to let an extension pass - a large percentage of those workers would now be employed and ineligible anyway. Democrats hammered the “cruel Republicans” for delaying the extension until the new year, but now the figures are out and, sure enough, unemployment claims plummeted in January.

I’ll make another prediction, based on Bush (and Karl Rove) Machiavellianism: The huge tax cut proposal was just a “confidence booster,” meant to induce a placebo effect, of sorts. Bush needed to show he was “concerned” about the economy last month, while things still looked weak, so consumers and businesses would regain their confidence. As the spring unfolds, with employment rising and “war anxiety” replaced with “victory relief,” the tax cut as a package will dwindle away to a few targeted code changes that shore up middle-income voters, along with, perhaps, an effort to move up some of the cuts already passed and make others permanent. By June, Bush will be signing this much reduced, yet much ballyhooed, package. Added to the oil price crash after the war, it will be all the stimulus needed to get things roaring again. I expect the second half of 2003 to have growth in the 5 to 6 percent range. Mark it down.

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