House Chamber, Washington, D.C.
November 6, 2009
This week the House passed HR 3548 that extends unemployment benefits in states with unemployment rates over 8 ½ percent for an additional 13 weeks. The measure also continues the popular $8,000 tax credit for first time homebuyers and adds a new $6,500 tax credit for homebuyers who are currently homeowners.
M. Speaker, I know these are very popular programs, but I believe that they are taking us in exactly the wrong direction. By increasing taxes to finance these programs, the government is placing increasing burdens on the economy that I believe is actually making the recession worse. By raising taxes to help the unemployed, it makes more unemployed. And by paying people to buy homes, it is creating yet another housing bubble that will continue to drain the resources of our nation until it bursts.
Let me walk through both of these concerns.
Under this bill, unemployed workers in states like my home state of California can draw up to 99 weeks of unemployment benefits – almost two full years. I realize the quiet panic that accompanies every waking and sleeping moment of unemployed families as they wonder from one day to the next how they’re going to get by. But the only way out of that nightmare is genuine employment.
There’s a reason that California suffers one of the highest unemployment rates in the nation: it has one of the highest tax and regulatory burdens in the nation. Business and investment and the jobs they create flee such hostile environments and seek out less expensive and less burdensome harbors. One need only watch the domestic migration within our own nation to see this happening right now.
According to the Congressional Budget Office, this bill imposes a net tax increase of $2 ½ billion on our economy at a time when it can least afford it. That means higher unemployment.
Family breadwinners can see the additional unemployment checks in their hands, and that’s why this bill is so popular. But what they can’t see are the jobs that could have ended their agony, but that have now disappeared in order to pay the higher taxes to support those unemployment checks.
It is a vicious downward spiral that the supporters of the bill have already tacitly acknowledged when they admitted that they’ll have to return before the end of the year to extend the bill yet again.
Simply stated, we cannot help the unemployed by creating more of them.
The second part of this bill is equally popular and it is equally delusional. It extends and expands tax credits for homebuyers to buy homes they otherwise couldn’t afford.
Have we learned nothing from the past year of economic hardship? The catalyst for the current recession was a housing bubble created when government policies encouraged housing lenders and borrowers to make and take loans to buy homes that everybody knew those borrowers couldn’t afford.
What’s our response? It is to provide additional tax money to encourage homebuyers to purchase homes that they otherwise couldn’t afford. And we’re doing this just weeks after watching how the “Cash for Clunkers” program created the same artificial bubble in the automobile market that came crashing down as soon as that program ended.
A society in which billions of dollars are extracted from its economy by its government in order to pay people to buy stuff they can’t afford has a rendezvous with a grim accounting. And the longer these programs continue, the grimmer that accounting will be.