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Economics is all about incentives. And if you incentivize people not to work, they will drop out of the labor force, and unemployment will rise.
Friday’s employment report is a stark dramatization of how the Biden Administration — with its grandiose designs to turn the US economy into a European-style welfare state — is providing all the wrong incentives. There’s a workforce on the verge of significant growth, if only the government would get out of its way.
Despite vast swaths of the economy reopening from the COVID shutdowns, and small businesses complaining they can’t find help, unemployment perversely rose to 6.1 percent in April. Hiring oddly slowed — only 266,000 jobs added to the economy, which is about 750,000 less than what was expected. The reasons for all these mixed signals are varied, but the primary source of the problem is extended unemployment, with hundreds of extra dollars tacked on to regular benefits. Wittingly or not, the administration is begging Americans to live on the dole instead of going back to work.
The president, of course, doesn’t see the logic that paying people to stay home means more people will do just that. But then again, he also doesn’t see the logic that being fully vaccinated and wearing a mask outdoors as he often does makes people think twice about taking the COVID vaccine. Responding to the weak employment report, Biden said the economy is on “the right track . . . My laser focus is on growing the nation’s economy and creating jobs.” Translation: He and his cronies think they now have a decent talking point to ram through a Congress with slim Democratic majorities another $4 trillion in spending on top of the $1.9 trillion he just finished putting into the economy.
Don’t just take my word for it. Before embarrassingly reversing herself earlier in the week, Treasury Secretary Janet Yellen surprised the markets by suggesting the economy might have to brace for higher interest rates to prevent possible inflation from an economy that could be overheating.
Inflation is the last thing our economy needs now as it pulls itself out of the lockdowns of the past year. It’s essentially a tax on the working and middle class to pay more for everything from food to fuel. But signs of looming inflation are everywhere including in rising commodity prices (see lumber futures, oil and copper prices as well). The markets are telling us there’s just too much money sloshing around chasing comparably fewer goods.
There could be other reasons for the weak jobs report. Maybe some businesses are putting the brakes on hiring as they brace for Biden’s planned tax increases. Thanks to the powerful teachers unions and their sway with Democrats, many schools remain shuttered, forcing parents to stay home with their kids.
And you might ask, if the people have money in their pockets, who cares where it comes from? The answer to that is pretty simple: Among the least efficient ways to run an economy is to have the government be the driver of it. If so, Europe would be awash in jobs, and the old Soviet Union would still be in existence. Democrats may be fine with paying people to stay home, but in the meantime, how many businesses are they hurting? When people do finally start looking for jobs, how many will be left to hire them?
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