“Morning Joe” had as guests this morning both Rep. Aaron Schock (R-IL) and Rep. John Shaddeg (R-AZ). These are two of the more thoughtful, reasonable Congressional members of either party. What struck me, though, is the formulation of economic policy that they were putting forth.

Rep. Shaddeg was being asked one of the media’s favorite questions these days, namely, why it is that extending unemployment benefits has to be “paid for,” but extending the Bush-era tax cuts does not. The response — predictable from either party — was that this was all about jobs. Shaddeg made the point that unemployed people don’t spend those unemployment benefits; they hold on to the money for as long as they can. Rep. Schock’s contribution was that the unemployed don’t hire people, business owners do.

To me, this is a complete distortion of economic reality. Of course business owners do the hiring, but why do they hire? They hire for one reason and one reason only: they need the workers to meet the demand for their goods or services. Certainly not because their taxes are lower (or higher). Where does the demand for goods and services come from? From consumer spending, mostly. Create more consumers, or increase the spending of the consumers we have, and demand goes up… and then hiring goes up. It’s pretty simple really. Except somehow it confounds the Washington crowd.

I am not making the case for or against extending unemployment benefits, nor the case for or against extending tax cuts. My point is that we will never get economically sound policy out of Congress if our elected representatives continue to put forth economic nonsense as the basis for policy.

Put very simply, we have to choose between more job creation or more debt reduction, at least in the short run. Republicans have come into town promising both. That’s nonsense. Those two policy aims, each important and valuable in its own right, work at cross purposes, at least in the short run. Pick one. You want job creation? Then extend unemployment benefits and extend the tax cuts — but be honest and tell the American people that it is necessary to raise deficits in the short term to stimulate those jobs. You want debt reduction? Then cut off the unemployment benefits and let the tax cuts expire — but be honest and tell the American people that job creation will suffer in the short run.

Advertisements