MO State Senator Jim Lembke’s Job Boom

A job boom came from ending unemployment benefits, just like Jim Lembke tried to get the MO state legislature to do.

jobless benefits

The Wall Street Journal editorial staff pointed out that Congress’ about face last year in zeroing out extra unemployment benefit last year resulted in 1.8 million jobs. You can read “President Costanza’s Job Boom” here if you have an online subscription. Here is a quotation:

The authors find that this abrupt policy shift created some 1.8 million jobs, or slightly more than three of five net positions filled in 2014. The cuts also pulled a million workers who dropped out of the labor force back into the workplace. This reality happens to be the opposite of what Mr. Obama and other liberal sachems predicted.

The editorial goes on to explain the theory behind the liberal schemes:

Cash transfer payments like jobless benefits were at the core of the Keynesian project of the 2009 stimulus. It was natural for Washington to try to help people through the recession. But Democrats also argued that redistribution would supply the best boost for the economy based on the theory of the spending multiplier. This said that every extra dollar of jobless benefits would increase “aggregate demand” and return $1.80 in higher GDP.

I have never understood Keynesian economics. How is it that redistribution creates wealth? What creates wealth? Labor, industry, and manufacturing create wealth. Wealth is created when someone builds a house. Wealth is created when people manufacture a car. Wealth is not created when someone sits on a couch.

The economy consists of millions of transactions occurring every day. When money transfers from one hand to the next, there is a transaction that presumably involves an exchange of something of value for money. As money is exchanged repeatedly in a free economy, each transaction results in the purchaser obtaining something in value at least equal to, and typically greater than, the value the money represents.

[See also, “Give the Devil His Due: Dems Were Brilliant to Temporarily Extend Jobless Benefits.”]

But when government intervenes to take money from producers and give it to those who are not producing, millions of those transactions are taken out of the mix. The transaction from producer to government produces no value. The transaction from government to couch potato produces no value. That money is taken from those who would spend it to produce something to those that will consume and not produce anything. The mass of valuable transactions destroyed by the sheer magnitude of our wealth distribution system is astonishing.

But when the benefits are zeroed out, people are motivated to get off the couch and begin to produce. When these new participants in the marketplace begin to produce, they add value to the transactional system that is our economy. More value is added, producing more opportunity to transact and create value. And it is a cycle that does not stop but for government intervention.

My friend former state Senator Jim Lembke fought to limit unemployment benefits in Missouri a few years ago. He was ultimately defeated by his Republican colleagues. If he had been successful, we might have had a little bit of the economic rebound we saw in 2014 in earlier years in Missouri. Mr. Lembke made a tough stand. He was criticized for it for being uncaring. However, as “President Costanza’s Job’s Boom” shows, his position was the most caring position a legislator can have. Keynesian economics destroys; work creates value and wealth.


David Linton is a resident of Missouri; he writes at the Blackstone Initiative.