Friday, July 23, 2010

EDITORIAL >>Benefits Extended

Whether you are a parent or the government, there is a time to be benevolent and a time to be tough. In the midst of the worst economic doldrums in 75 years, Congress decided this week that it was still time to be benevolent. Both the Senate and House of Representatives voted to extend unemployment benefits a while longer for 2.5 million Americans who lost their jobs in the 2008-’09 meltdown and haven’t been able to find new ones. Nearly 17,000 of them are in Arkansas, which has not been hit as hard as states with large manufacturing quotients.

It was the right thing to do, for both humanitarian and economic reasons. That is a lot of personal suffering, and the continued spending on food, utilities and mortgages is a small but important bootstrap for the economy, which still seems poised to plunge deeper from the precipice.

The unemployment extension sadly became a political rather than an economic or humanitarian issue. That was especially so in Arkansas, where every vote is now measured for its effect on the U.S. Senate race. Sen. Blanche Lincoln voted for the extension, along with most Democrats. Her opponent, Rep. John Boozman, voted against it, as always with the Republican leadership.

Republicans picked a fight over the unemployment extension on the hunch that people were madder about the federal budget deficit than they were concerned about those on the unemployment lines and their families. They may be right. They are looking over their shoulders at the tea-party movement, which stakes out the deficit as the overriding concern of the times.

Neither Lincoln nor Boozman wasted any time seeking an advantage from their votes. Lincoln said she did not believe the country should turn its back on Arkansas workers who had lost jobs through no fault of their own and are seeking jobs. She wanted Boozman to explain how he could turn his back on them.

Boozman embraced his party’s defense: If the government was going to spend $34 billion keeping food on the tables of the unemployed, it ought to cut the same amount from the rest of the stimulus program. That makes no economic sense. You help the currently unemployed by putting others out of work. In Arkansas, it would mean reducing help for medical care for the poor or halting aid that keeps highway workers, teachers and city policemen on the job.

Boozman said he was philosophically opposed to extending jobless benefits without countervailing cuts in spending elsewhere.

But he was not truthful. When it was a Republican president seeking to stimulate the economy by extending unemployment benefits, he always voted for it, once in 2002, twice in 2003 and twice in 2008. Those were the days when President George W. Bush, aided by a Congress of his own party, was building the massive deficits. Deficits became a big issue only when President Obama inherited them.

It may be time to recapitulate. In 2001, when Bush (and Boozman) took office, the United States was running a budget surplus of $86 billion — $236 billion if you added in the excess of Social Security tax receipts — and the year before Bush left office, surpluses had ended and the on-budget deficit had soared to $642 billion ($458 billion if you throw the Social Security surplus into the pot). Boozman was so unbothered by the deficits that he was voting unemployment extensions and boasting about helping the unfortunate.

The massive deficits are indeed a dilemma. Relieving suffering and giving the economy an injection run up the deficit. But that is temporary red ink, and although it will have to be repaid in the same way as the rest of the debt, the grave problem is the structural deficit, which arises from the tax-and-spend policies of the past decade, and the recession, which has reduced the government’s revenues by $500 billion a year. How can we revitalize the economy so that those revenues will be restored, and how can we eliminate the $600 billion-plus deficit produced by the rounds of tax cuts, two wars and a huge unfunded Medicare expansion during the Bush years? That is what ought to preoccupy Boozman, Lincoln, their parties and the president.

President Obama and his party seem as flummoxed as anyone about how to fix things. He has tried targeted tax cuts for businesses and working people and a modest stimulus program, and they have produced very modest results. But we know that the Republican plan will not work. Sen. Mitch McConnell, the Senate Republican leader who was in the state the other day raising money for Boozman, says the solution is big tax cuts for corporations and the investment class. Wednesday, he said there was no evidence that tax cuts reduced government revenues; rather, he said, they create jobs and produce more government revenue.

No evidence? He should look at the Treasury Department’s figures. When Bush and Congress (with the help of both Lincoln and Boozman) began to slash income taxes on high personal incomes and corporations, federal income tax receipts plummeted from $1.2 trillion in 2000 to $925 billion, and it took six years for revenues to reach even the 2000 level again. What clearer evidence could you expect? And during that period, fewer jobs were created than during any comparable period since World War II.

But we will not solve that problem now, or ever, by being penurious with the needy and a fragile economy.