Conservatives, Republicans, and just people with an understanding of how economic incentives work have long expressed concerns that the exceptionally high unemployment benefits that have been offered in the wake of the government-mandated lockdowns would actually encourage people to stop working.
Once the Federal additions to the benefits are taken into account, quite a few people end up making more money collecting unemployment than they do working. And why would anyone work when they don’t have to and when working would net them less money than not working?
Appearing on MSNBC’s show “All In” on Thursday, May 6, Ohio Democratic Senator Sherrod Brown attempted to answer such concerns.
And what he said was, quite frankly, unhinged and utterly divorced from even the basics of economic reality.
Let Them Eat Cake
Speaking to MSNBC host Chris Hayes, Senator Brown said the following in the response to the idea that high unemployment benefits provide toxic incentives: “Well, I would say maybe employers ought to increase wages, you start with that.”
Underlying this shockingly out-of-touch statement is the belief that businesses are nothing but endless reservoirs of cash that can be exploited at will and without consequences.
But they are not. Unlike politicians, business owners cannot just print money whenever they don’t have enough of it to go around. They must operate under constraints. They have operating costs that they cannot simply wish away.
If a business pays a worker a certain amount and no more, this is usually because the business doesn’t have enough revenue to pay higher wages. This is especially true for smaller and thin-margin businesses like restaurants.
Senator Brown’s statement is the equivalent of saying, “Let them eat cake.”
An Unprecedented Experiment
What has been going on in America over the last year or so is utterly unprecedented, and not because a disease has been spreading throughout the country. America has survived pandemics before, including ones that have had higher per-capita death totals than COVID-19.
What is truly unprecedented, however, is the enormous, society-wide, economic and monetary experiment that the US government and the Federal Reserve have been running in the country. Never before has it been thought possible to order the shutdown of virtually an entire economy, deliberately cripple employment, productivity, and economic coordination more generally, and then attempt to keep the whole thing running using nothing but periodic infusions of cash.
In short, Washington and the Feds have created a simulacrum of an economy. Our elites have deluded themselves into thinking that an economy can run without people being employed and without critical goods and services being produced and offered. They are attempting to sustain the whole thing with debt.
There is no way that this can last. As with everything in Washington, politicians have imagined that they can solve this problem by simply throwing money at it. And then, economic illiterates like Senator Brown get onto their soapboxes, pontificating and complaining that everyone isn’t throwing money around in the same reckless way that they are.
When the government has the ability to generate unlimited quantities of money, they can afford to sustain such delusions — but only for a while.