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NATIONAL
JOBS FOR ALL COALITION % CIPA, 777 UN Plaza, Suite 3C, NY,
NY 10017
UNCOMMON SENSE 1
©September 1997
[Rev.]
INCREASING
UNEMPLOYMENT
INCREASES
THE DEFICIT
REDUCING
UNEMPLOYMENT REDUCES THE DEFICIT
By
Helen Ginsburg, Professor of Economics, Brooklyn College
of the City of New York and Executive Committee, National Jobs
for All Coalition, and Bill Ayres,
Director, World Hunger Year and Advisory Board, National Jobs
for All Coalition.
This issue was written at a time when the
major source of deficits was recession. These days, it is military
spending, tax cuts, and bank giveaways, which generate relatively
few jobs, as well as recession, so that our deficits
are not merely cyclical,1 but structural.2
To put it another way, the Congressional Budget Office [CBO]'s
estimates of the "high" employment [4.8% unemployment]deficit
or surplus3 once usually showed at most a small deficit.
Rather, there has been a large high-employment deficit since Bush
II and beyond. The CBO
projects a 2009 cyclically-adjusted deficit of $1.4 trillion.
Needless to say, it is still true that deficits are smaller with
higher employment. [JZ, Editor], 7/27/09
The President and
Congress try to outdo one another on who can cut the Federal budget
deficit the most. But efforts to reduce the deficit at the expense
of necessary social programs are unnecessary and counter productive.
In fact, much of the recent reduction in the deficit is due to
the decline in unemployment.
According to the last
Congressional Budget Office estimate of the impact of unemployment
on the deficit,* a reduction of unemployment by only one percentage
point starting in January 1995 and sustained through fiscal
year 2000 would have netted the government $415 billion over those
six years. Most of that would come from increased taxes paid by
more people working and greater business profits ($315 billion).
The rest would result from less money needed for unemployment
insurance and other social programs ($32 billion), and less money
spent on interest payments to service the debt ($68 billion--$23
billion in fiscal year 2000 alone).
Remember, this $415
billion is from only a one percentage point decrease in unemployment.
The mind boggles when confronted by how much could be generated
if we actually reached a level of full employment. Think of how
that money could then be reinvested in our society to fund the
education and training programs we need to raise more than a quarter
of our citizens out of poverty and near-poverty, to eliminate
hunger, rebuild our transportation systems, housing, and recreation
areas, improve our environment and support working parents with
child care.
Every percentage point
less in unemployment makes good economic sense by not only reducing
the budget deficit, but also reducing the human deficit that we
see in the economic insecurity, growing poverty, hunger, homelessness
and crime that are tearing apart our society. We'll get stronger
families and an enhanced quality of life.
Let's have full employment
and reinvest the savings into a more productive, livable society
with Jobs for All!
*Congressional
Budget Office, Economic and Budget Outlook: Fiscal Years 1996-2000
(Jan 1995). The CBO for years has made this estimate, but
no longer does so. For further information about the deficit,
see Sheila D. Collins, Helen Lachs Ginsburg and Gertrude Schaffner
Goldberg, Jobs For All: A Plan for the Revitalization of America,
New York: Apex Press. 1994. Chapter 10.
1. resulting from recession.
2. they'll still
be there when the recession is over.
3.what the budget balance would be if we were
at 4.8% unemployment, "high" employment, presumably
the best our economy can manage.
Editor:
June Zaccone, Economics (Emer.), Hofstra University
The
National Jobs for All Coalition is a project of the Council on
Public and International Affairs.
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