8.2 Percent Unemployment Rate Solution: Give People Money, Spark Demand

Seventy percent of the U.S. economy is consumer spending. Someone in George W.  Bush administration’s knew this when Bush stood before the nation after the 9/11 attacks and told us to go shopping. You see, without that consumer spending our economy will crash. 

There are certain phrases Republicans like to use in their rhetoric that sadly our lazy media has adopted. “Death tax” and “job creators” are inventions of Republican pollster and public relations guru Frank Luntz, who like other GOP operatives, seeks to obscure reality behind a guise of phony rhetoric. You are reading this because you are not lazy and like information – even if you do not agree with the conclusions I am about to draw. 

Currently, American businesses are sitting on close to $2 trillion in cash. But they aren't spending it. Now some would have you believe this reluctance to spend money (and boost the economy) is because of “uncertainty” about regulation and taxation. None of that is true. The uncertainty fairy does not exist. Businesses will spend money and hire people when they have to because of increased demand. 

This demand can only come from the job creators. The true job creators: the shrinking, embattled, union-stripped, indifferently educated, two-job working, debt ridden semi-employed middle and lower class that make up 98% of individual consumers. That is the 306,335,000 Americans who make less than $250,000 per year of earned income out of a total of 311,000,000 Americans.

But wait a minute, unemployment is at 8.2%. We need jobs so businesses need to start hiring. But there is no demand. Businesses can meet current demand with their current employees in what is a a classic chicken or egg situation. What comes first? Hiring or demand? Only an idiot would hire someone before there is a need. Most businesses will use overtime before hiring people. So we need to create demand.

So here's an idea: Give people money. Give to those who will spend it. In fact, give it to those people that are unemployed and keep giving it to them until we are back at full employment (which was 4% when I was in high school). Give it to them good, long, and hard.

In testimony before a House Committee in 2008 Mark Zandi an economist at Moody's and former advisor to John McCain ranked extended unemployment benefits as the second best of 13 policy options for stimulating the economy. Sad (to libertarians) to say the best way was increasing food stamp payments. The Congressional Budget Office says every $1 of UI benefits generates $1.64 of economic benefits. Food stamps generated $1.73 of economic activity for every $1 paid out. Making the Bush tax cuts permanent was the 12th best option-generating 29 cents for every dollar spent. Note: tax cuts do NOT pay for themselves. I Laffer at that idea.

How does that work? It is simple. The money for food stamps can only be used to buy food. When someone goes to the grocery store they have to give their card to the cashier (who has a job). The grocery store has to restock their shelves. This gives employment to farmers, food processors, truck drivers and the list goes on and on. Now if you give the same money to someone who has all the money he needs, that person is much more likely to just put it in a bank in the Cayman Islands.