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UNINTENDED CONSEQUENCES: IS GOVERNMENT 

EFFECTIVELY ADDRESSING THE UNEMPLOYMENT CRISIS? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, 

JOB CREATION AND REGULATORY AFFAIRS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 14, 2013 

Serial No. 113–2 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, Jr., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION AND REGULATORY AFFAIRS

JIM JORDAN, Ohio, Chairman 

JOHN DUNCAN, Tennessee 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

DOC HASTINGS, Washington 

CYNTHIA LUMMIS, Wyoming 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY BENTIVOLIO, Michigan 

RON DESANTIS Florida 

MATTHEW A. CARTWRIGHT, Pennsylvania, 

Ranking Minority Member 

TAMMY DUCKWORTH, Illinois 

GERALD E. CONNOLLY, Virginia 

MARK POCAN, Wisconsin 

DANNY K. DAVIS, Illinois 

STEVEN A. HORSFORD, Nevada 

(III) 

C O N T E N T S 

Page 

Hearing held on February 14, 2013 ....................................................................... 1 

WITNESSES 

Casey B. Mulligan, Ph.D., Professor in Economics, The University of Chicago 

Written Statement ............................................................................................ 5 

Oral Statement ................................................................................................. 7 

C. Eugene Steuerle, Ph.D., Institute Fellow and Richard B. Fisher Chair, 

The Urban Institute 

Written Statement ............................................................................................ 25 

Oral Statement ................................................................................................. 27 

Andrea L. Carter, Owner and President, Carter Machine Company 

Written Statement ............................................................................................ 39 

Oral Statement ................................................................................................. 41 

Chad Stone, Ph.D., Chief Economist, Center on Budget and Policy Priorities 

Written Statement ............................................................................................ 46 

Oral Statement ................................................................................................. 48 

The Honorable Stacy G. Reece, Former Member of the Georgia State House, 

Franchise Owner, Spherion 

Written Statement ............................................................................................ 56 

Oral Statement ................................................................................................. 58 

APPENDIX 

The Honorable Jim Jordan, a Member of Congress from the State of Ohio, 

Opening Statement .............................................................................................. 90 

The Honorable Gerald E. Connolly, a Member of Congress from the State 

of Virginia, Opening Statement .......................................................................... 92 

(1) 

EFFECTIVELY ADDRESSING THE 

UNEMPLOYMENT CRISIS? 

Thursday, February 14, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION, 

AND REGULATORY AFFAIRS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 2 p.m., in Room 2247, 

Rayburn House Office Building, Hon. Jim Jordan [chairman of the 

subcommittee] presiding. 

Present: Representatives Jordan, McHenry, DesJarlais, Collins, 

Meadows, Bentivolio, DeSantis, Cartwright, Duckworth, Connolly, 

Pocan and Horsford. 

Staff Present: Brian Blase, Professional Staff Member; Linda 

Good, Chief Clerk; Tyler Grimm, Professional Staff Member; Christopher Hixon, Deputy Chief Counsel, Oversight; Michael R. Kiko, 

Staff Assistant; Kristin L. Nelson, Counsel; Jaron Bourke, Minority 

Director of Administration; Devon Hill, Minority Research Assistant; and Brian Quinn, Minority Counsel. 

Mr. JORDAN. The Subcommittee on Economic Growth, Job Creation and Regulatory Affairs will come to order. I want to welcome 

our new members, and we have two of them here today, Mr. Meadows and Mr. Collins. I’m glad to have you part of the committee. 

And, of course, the ranking member Mr. Cartwright, I want to welcome you and your team as well. We’ve had a great relationship 

working with the minority party the last 2 years, and I would like 

to think before that. Mr. Kucinich and I have been on this committee for 4 years had a great relationship when we were in the 

minority. So we look forward to working with you and your team 

as we have several hearings here in this Congress. 

You got to listen to me do an opening statement and then Mr. 

Cartwright an opening statement, and then we’ll get you sworn in 

and get right to it. We have a great panel, some small business 

owners and some experts in the field. We will get to you as quickly 

as we can. But let me just do a quick opening statement, and then 

we’ll turn it over to Mr. Cartwright and get right to our witnesses. 

Today’s hearing is about America’s unemployed and understanding the failure, the failure of Federal efforts to get them back 

to work. Four years ago this week, an 800 billion stimulus spending package was signed into law with the intent of creating jobs 

and jump-starting economic growth. The administration justified 

the stimulus with a report stating that as a result of this legislaVerDate Aug 31 2005 12:06 Mar 08, 2013 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\79464.TXT APRIL
2 

tion, the unemployment rate would never, never exceed 8 percent 

and would be 7 percent and falling by February of 2011. 

Obviously that didn’t happen. That unemployment rate is still 

hovering around 8 percent, representing 12.3 million Americans 

out of work. When we also count the broader universe of people 

seeking work, the unemployment rate climbs to over 14 percent. 

We are still in the jobs crisis, and we must understand why. 

Since 2007, there have been at least a dozen new or expanded 

Federal safety net programs. For example, various unemployment 

insurance and food stamp programs have increased, and eligibility 

has been expanded. The most drastic of these changes came via the 

2009 stimulus law. These additions to the way the Federal Government assists the unemployed have in their totality collectively 

changed the incentives faced by those seeking work. 

One of our witnesses today, Professor Mulligan of the University 

of Chicago, has done groundbreaking research that shows that as 

a result of our layered social safety net programs, there is a large 

number of American households for whom the reward for working 

is zero or negative when compared to the benefits received while 

unemployed. In other words, a person might have more income to 

use or save as a consequence of working less. Professor Mulligan 

estimates that in 2009 approximately 4 million individuals, 4 million of our fellow citizens, would either not benefit at all from returning to work or, even more troubling, would actually be worse 

off financially from getting a job. 

No one believes that President Obama or my colleagues on the 

other side of the aisle wish to prolong the time Americans spend 

without jobs. The focus of today’s hearing is on the unintended consequences that too often stem from well-intentioned policies. 

In addition to our expert economist this afternoon, we’ll also hear 

from two job creators who have experienced this unsettling phenomenon firsthand as they try to hire people and they get reasons 

why, no, it is better off if I don’t take the job that you are offering 

and that you need to better your business. 

Some may charge that the arguments presented here today are 

uncompassionate to folks struggling to find work, but nothing could 

be further from the truth. Of course we believe in a safety net for 

those who have fallen on hard times, but people must not be made 

worse off as a result of that safety net. What is truly not compassionate is penalizing people for going back to work. We need to 

rethink and reorganize the way we administer our social safety net 

so that we empower people rather than dooming them to a life of 

dependency. 

That is our focus today. 

Mr. JORDAN. And with that I will turn it over to our ranking 

member Mr. Cartwright. The gentleman may proceed. 

Mr. CARTWRIGHT. I thank you, Chairman Jordan. I certainly look 

forward to working with you and the members of this subcommittee on issues and policies relevant to strengthening our 

economy, creating jobs and ensuring reasonable regulation of markets. 

I would like to welcome our witnesses here today. I look forward 

to hearing your testimony and your perspectives on government 

policies to address the unemployment crisis that has resulted from 

3 

America’s longest and deepest economic downturn since the Great 

Depression. Of course, President Obama inherited an economy in 

free fall. It was losing over 700,000 jobs a month. GDP was contracting at an annual rate of 6 percent. The Great Recession was 

characterized by a 10 percent unemployment rate, the highest level 

of unemployment in 30 years. 

Congress responded to the economic crisis by passing the Recovery Act. The law included stimulus funding to create new jobs and 

spur the economy, as well as several provisions that expanded and 

enhanced safety net programs and tax policies intended to support 

the unemployed and encourage their efforts to regain permanent 

employment. 

These policies provided critical assistance to individuals facing 

hardships from the loss of employment. Those policies also helped 

stimulate economic growth by stabilizing the decline in demand. 

Economists have estimated that without the Recovery Act and 

other fiscal policies, unemployment would have topped 11 percent, 

costing nearly 4 million jobs, and that recession would have been 

far worse. 

Throughout our history we’ve seen the government soften recessions through investments in our country which help inject needed 

capital into the economy and create jobs, and therefore, I am extremely concerned that the pending across-the-board spending cuts 

demanded by the Budget Control Act will damage our still fragile 

recovery. Slash-and-burn cuts at a time when the economy is growing slowly will stifle growth and intensify the hardships faced by 

many Americans. 

Economists have estimated that the sequestration will cause our 

economy to shed as many as 2 million jobs. We’re busy worrying 

about unintended consequences of unemployment insurance when 

we should be worried about the unintended, but clear-as-day consequences of a sequester that will put an additional 2 million people out of work. Instead we should choose to make critical investments that would significantly grow the economy and address this 

unemployment crisis. 

During past economic crises our country has been in far greater 

debt when put in the proper perspective as a proportion of GDP. 

At the end of World War I, in 1946 the debt-to-GDP ratio stood at 

almost 122 percent, but we were able to gradually lower our debt 

because government investment in public infrastructure spurred 

decades of immense growth. Our greatest generation came back 

from war, and our government led the way by giving people an 

education through the GI bill, and lifting them into the middle 

class by putting people to work on the Interstate Highway System, 

and by engaging engineers and scientists to put a man on the 

moon. 

If we want to reduce the deficit, which is a goal all of us share, 

then getting our economy going is the surest way to do that. Between 2008 and 2009, Federal tax receipts fell by 17 percent, $419 

billion, the largest year-over-year drop in 70 years. Corporate tax 

receipts fell by 54 percent in 1 year. Deficits are more than just 

about spending; they are also about the economy and revenues by 

investing in getting our economy going, which will for a time inVerDate Aug 31 2005 12:06 Mar 08, 2013 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\79464.TXT APRIL
4 

crease the deficit. In the long term the deficit will shrink far faster 

as tax receipts grow. 

That’s why sequestration is not the right approach. We need targeted investments so that in the future we can have a more productive economy and more jobs for our citizens. Congress needs to 

have a balanced approach, raising revenues and cutting unnecessary programs, to get the budget on the right path. 

Infrastructure investment was a part of the Recovery Act, it was 

proposed in President Obama’s American Jobs Act, and it was emphasized again in the President’s State of the Union Address earlier this week. It’s time we take action, propose initiatives, invest 

in improving school and transportation infrastructure that will create jobs throughout the country. This is how the Federal Government can continue to effectively address the unemployment crisis, 

and I thank the chairman for calling this hearing and look forward 

a productive dialogue on these issues. 

Mr. JORDAN. I thank the ranking member for his statement. 

Let’s get right to our panel. Dr. Casey Mulligan is professor of 

economics at the University of Chicago. A great tradition that university has is of producing outstanding economists. 

Dr. Eugene Steuerle is the Richard B. Fisher Chair and Institute 

Fellow at the Urban Institute. I want to thank you for being with 

us today. 

Ms. Annie Carter is the co-owner and president of her family 

business, Carter Machine, in Galion, Ohio, so I am especially glad 

to welcome Annie. Galion is part of the Fourth District of Ohio. 

And we also have Dr. Chad Stone, who is the chief economist at 

the Center on Budget and Policy Priorities. 

And I will yield to the gentleman from Georgia to introduce our 

last witness. 

Mr. COLLINS. Thank you, Chairman Jordan. 

I am pleased to introduce Stacey Reece. He is a constituent, a 

former State representative, and longtime member of the Gainesville, Georgia, community. 

Mr. Reece is a 15-year veteran of the professional recruiting and 

staffing industry. He is co-owner of Spherion, a national professional recruiting and staffing franchise. Mr. Reece graduated from 

the University of North Georgia and University of Georgia banking 

school. He served as the vice president of the First National Bank 

in Gainesville for almost 15 years prior to entering the staffing industry. Mr. Reece also served two terms in the Georgia House of 

Representatives where he served on committees as economic development, appropriations, and held other various leadership roles. 

I am pleased to welcome Mr. Reece, and I appreciate you testifying before the subcommittee today. 

Thank you, Mr. Chairman. I yield back. 

Mr. JORDAN. Thank you, Mr. Collins, and thank you all for being 

here. We have—pursuant to committee rules, all witnesses are to 

be sworn in before testifying, so if you will please stand and raise 

your right hand. 

Do you solemnly swear or affirm that the testimony you’re about 

to give will be the truth, the whole truth, and nothing but the 

truth, so help you God? 

Let the record show all witnesses answered in the affirmative. 

5 

I have got one more thing to do before we get to Professor Mulligan. Members have 7 days to submit opening statements for the 

record. 

And, Doctor, you are recognized. You know how it works. You get 

5 minutes, and I’m a nice guy, so keep it close, and you’ll be fine. 

And then we go right down the list. 

WITNESS STATEMENTS 

STATEMENT OF CASEY B. MULLIGAN 

Mr. MULLIGAN. Thank you, Chairman Jordan, and Ranking 

Member Cartwright and members of the committee. I appreciate 

the opportunity and honor to discuss with you today how public 

policy has changed the reward to work. A multitude of programs 

affect that reward and thereby affect who is employed. 

The monetary reward to work can sometimes be zero or worse, 

because retaining or accepting a job creates tax expenses and denies subsidies with a combined value that sometimes exceeds the 

paycheck from working. Nobel laureate James Tobin was a leading 

Keynesian economist and key advisor to President Kennedy, and he 

pointedly described 100 percent implicit tax situations. He said 

that they caused needless waste and demoralization. It is almost 

as if our present programs of public assistance have been consciously contrived to perpetuate the conditions they are supposed 

to alleviate. 

The monetary reward to working is the difference between the 

resources a person has available to use or save if she works and 

what she has available if she does not work. People without jobs 

or otherwise with low incomes sometimes receive benefits from 

safety net programs. The benefits are rarely called taxes by the 

laymen, but economists understand the benefits to have many of 

their characteristics of tax rates, because a program beneficiary 

loses some or all of her benefits as a consequence of accepting a job. 

The more income that a person receives when not working, the 

less is the reward to working. The combined effect of taxes and 

subsidies on the reward to accepting a new job can be summarized 

as a job acceptance penalty; that is, the effective amount that is 

lost from paying taxes and replacing benefits associated with not 

working. I like to express that penalty as a rate, namely, as a percentage of employee compensation. Now, if there were no penalty, 

then that rate would be zero. But the job acceptance penalty rate 

can also be large; it can sometimes equal or exceed 100 percent, 

which means that a person might have more resources available to 

use or save as a consequence of working less. 

Legislation that cuts or credits taxes, so to speak, can nonetheless reduce the reward to working and increase the job acceptance 

penalty rate if it cuts taxes more for those who work less. 

The reward to working matters. High penalty rates are associated with small incentives to seek, create and retain jobs. The consequences of high penalty rates are felt all over the economy, even 

by people whose individual penalty rates might not be all that 

high. 

At the same time that safety net programs implicitly tax job acceptance, they also implicitly subsidize layoffs, because the proVerDate Aug 31 2005 12:06 Mar 08, 2013 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\79464.TXT APRIL
6 

grams absorb some of the income and production that employer 

and employee lose when an employee stops working. Now, America 

absolutely must have taxes and safety net programs even though 

they reduce the reward to working in subsidized layoffs, but if this 

Congress wants to understand what is happening in the labor market, it would be counterproductive to approximate penalty and subsidy rates as zero or to assume them to be eternally constant regardless of what incentives are embodied in new legislation. 

Unemployment benefits are, of course, now available longer into 

unemployment spells than they were 6 years ago. But also don’t 

forget that new modernization provisions now provide benefits in 

a variety of circumstances when they were formerly unavailable. 

While it lasted, the Recovery Act also added a bonus to weekly unemployment checks and helped unemployed people pay for their 

health insurance. The Food Stamp Program expanded in a variety 

of dimensions. 

The combined effect of these and other changes through 2012 

was to reduce the reward to work for most of the nonelderly population. Among the 23 million layoffs experienced by nonelderly 

American household heads and spouses during the recession, at 

least 4 million of them had penalty rates near or above 100 percent. 

I brought a chart with me today and the height of the bar in that 

chart is the average penalty among those 4 million layoffs. One 

hundred percent means that the entire compensation from the job 

offer, fringe benefits and all, would be devoted to paying added tax 

expenses and replacing withdrawn benefits. It did not have to be 

this way. The bar on the right shows what would have happened 

to the same 4 million penalties if there had been no Recovery Act. 

The white space at the top is the reward to working. It’s what’s left 

over after expenses are paid and withdrawn benefits are replaced. 

Yes, that reward is small compared to all the expenses, but it was 

something, and, by looking at the left bar, we can see how the Recovery Act completely erased it. 

The chart also shows us how several programs combined to create these penalties. Unemployment insurance is the single largest 

disincentive, but without the others the reward to working would 

have been pretty large. It’s no surprise that layoffs surge and unemployment durations lengthen during the recession, at the same 

time when new laws were adding to layoff subsidies and adding to 

job acceptance penalties. A presumably unintended consequence of 

the recent safety net expansions has been to reduce the award to 

working and thereby keep employment rates low, keep unemployment and property rates high, and keep national spending low 

longer than they would have been if safety net program rules had 

remained unchanged. 

Thank you. 

Mr. JORDAN. Thank you, Doctor. 

[Prepared statement of Mr. Mulligan follows:] 

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Mr. JORDAN. We will go next to Dr. Steuerle. 

STATEMENT OF C. EUGENE STEUERLE 

Mr. STEUERLE. Thank you, Mr. Chairman, Mr. Cartwright and 

members of the subcommittee. I appreciate the opportunity to testify before you today on labor force participation and our Nation’s 

tax and social welfare systems. 

I begin by putting all of this into a much broader context that 

goes beyond just what’s happened in the Great Recession. Modern 

society must begin to adjust to a very different labor force dynamic 

than prevailed in the last half of the 20th century. At that time 

baby boomers, women, and a more educated young population entered the workforce. Today all of those forces of growth for labor 

force as well as their positive impact on being able to come out of 

recessions and promote demand have gone by the wayside. And 

today we also face extended joblessness among the young, the unemployed and the disabled. Labor force participation among the 

young, particularly men, has trended downward for the past three 

decades, only exacerbated by the Great Recession. 

Evidence shows that prolonged periods of labor force separation 

create longer-term problems. They depress future earnings for such 

workers, work habits can dissipate, and feelings of depression can 

set in. 

Now, consider whether our social welfare system is starting to 

adjust to these new circumstances. These systems have largely 

been devoted over time to providing higher levels of consumption 

to people, but consequently have added to the disincentives for 

work and saving. 

Now, one can disagree, and there is disagreement in the literature, on the extent of past successes, yet still agree that at the 

margin we ought to be shifting more of our dollars towards government programs aimed at opportunity, those that favor education, 

work and saving, and put less emphasis on consumption. 

Now, our social welfare system affects work in two ways. First, 

the additional consumption provided to people or income is often 

sufficient for some of them simply to reduce their labor supply; 

and, second, a major focus of this hearing, families can face prohibitively high penalties for additional work. 

Consider particularly households with children. Right now our 

combined tax and spending systems encourage labor force participation until family income reaches the poverty level. This has actually been a positive aspect of welfare reforms and earned income 

credit reforms in previous decades. That is, we have favored movement into the workforce except for the unemployment case that Dr. 

Mulligan points to. But after reaching about poverty level, low- to 

moderate-income households often face marginal tax rates of about 

50 to 60 percent merely if they participate in universally available 

programs like food stamps, now SNAP, the earned income credit, 

and soon, by the way, the new health exchange subsidies, which 

also have their own implicit tax rate on additional earnings. 

How benefits change with income levels is shown in figure 1 in 

my testimony. Meanwhile, households who participate in other programs such as limited entitlement programs such as the Temporary Assistance for Needy Families or housing subsidies often 

26 

face tax rates of 80 to 100 percent. And again, these figures are 

independent of the unemployment compensation examined by Dr. 

Mulligan. 

The problem of high effective marginal tax rates facing low-income workers especially affects households looking to move out of 

poverty toward middle-class status. I deem this the ‘‘twice poverty 

trap.’’ Now, one thing have we learned from public finance is the 

taxes have significant effects on portfolio behavior even if there is 

less certain effect on work and saving. Not getting married has 

now become the major tax shelter for low- and moderate-income 

households with children facing these high marginal tax rates. By 

avoiding marriage they avoid the high tax rates that would be implicitly borne by the household when they marry and they combine 

their incomes and thereby lose benefits. 

These high tax rates and marriage penalties arising in these systems occur in part because of the piecemeal fashion in which they 

are considered. Congress has designed so many direct and indirect 

taxes and phaseouts that it can have little idea of how it affecting 

the true returns to work for large portions of the population. 

So just to give you some idea of these implicit taxes and where 

they sit, they are everywhere. They are in TANF; in SNAP, or food 

stamps; they are in Medicaid and the new health exchange subsidies; they are in PEP and PEAS, which we just reenacted as part 

of the recent tax reforms; they are in Pell grants and student loans; 

American Opportunity credits and Lifetime Learning tax credits; 

housing vouchers or low-income housing tax credits; child tax credits or income credits; Medicare Part B and Part D; Social Security 

exemption from taxation of supplemental security income; school 

lunches and Child Care and Development Fund; Head Start and 

Early Start; Special Supplemental Nutrition Programs for Women, 

Infants and Children, or WIC; child independent care tax credits; 

retirement saving credits; premium assistance credits; and unemployment compensation, workers compensation. All of these have 

implicit tax rates in them. 

My point simply is this, that our modern economy requires modern approaches to social welfare and taxation. Many compromises 

I believe can cut across traditional liberal and conservative boundaries by maintaining a progressive agenda, yet emphasizing better 

the work, education and saving requirements required for the modern economy and required for the modern worker to succeed. At a 

minimum we need to begin approaching our wide assortment of 

programs, benefit phaseouts and tax rates in a much more integrated fashion. It’s hard to design programs well if we lack even 

basic understandings of all the ways they interact. 

Mr. JORDAN. Thank you, Doctor. 

[Prepared statement of Mr. Steuerle follows:] 

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Mr. JORDAN. Ms. Carter, you’re up. 

STATEMENT OF ANDREA L. CARTER 

Ms. CARTER. Thank you for inviting me to testify today. 

Mr. JORDAN. Make sure your microphone is on there. 

Ms. CARTER. Thank you for inviting me to testify today. My 

name is Annie Carter. I am the president and co-owner of Carter 

Machine Company. We are located in Galion, Ohio. Our company 

designs, repairs and manufactures hydraulic and pneumatic cylinders mainly for the steel industry, and baling industry, recycling 

industry, large presses, material movement. We currently have 57 

employees, but we would greatly benefit by having an effective employee rate of about 70 to 75 people. 

Manufacturing was the foundation and the backbone of this 

country, and it is now considered something that people will do if 

they don’t have any other choices. Our company is comprised of 50 

percent administrative staff, such as engineers, production, purchasing, computer programmers, human resources, and 50 percent 

skilled labor. Our business is a custom design business. We—our 

company is built on a quality platform, and we require machinists 

and staff that have above-level skills in order to make the products 

that we market. This can include older-style manual equipment 

and also sophisticated CNC equipment. 

It’s very difficult for us to find people that want to do any of 

those jobs, let alone run the older, manual, more sophisticated, let’s 

say, skill-related machining than the regular CNC-type equipment. 

We have a real need for manufacturing or skilled trades in our 

area. We have a true deficit through many of our companies. Our 

individuals are proud to be machinists, they are proud of our product, and they take their jobs very seriously and consider themselves something more than what they are considered today in the 

outside world by people that are looking for jobs. 

We’ve reached a point in society where it’s not honorable to learn 

a trade or to perfect a skill. It’s considered as something, again, 

people do when they don’t have anything else to do. I’ve spoken to 

high school students many times who are consistently fed the career path through college. They don’t know what a trade job is, and 

they don’t consider that an option for them in the long term. I don’t 

think they believe they can make a living at the trades because of 

what they’re being taught. And they really don’t have any exposure 

anymore through wood shop, metal shop, any of those things in the 

past that were part of the curriculum in school. 

We continue to receive comments from students that, you know, 

that’s going to be a hot and dirty job, and I’m just not interested 

in doing that type of work. In our area it has become very obvious 

that work is an option, not a necessity. Programs intended to be 

a bridge from one employment situation to another have turned 

into lifestyle choices, again, not a necessity to get a job. 

Our experience in our hiring practice would say that 8 out of 10 

of the people that we hire, offer jobs, consider for employment 

would prefer to stay on benefits than to learn a trade or to have 

a longtime career with pay and benefits. Often we hear, I have X 

number of weeks left on unemployment; I’m going to ride it out, 

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ment, and I won’t need to look for a job. I’ve been on unemployment for 2 years, and when it runs out in a couple weeks, will you 

have any openings then? The starting training wage for this job is 

less than I make on unemployment; I will stick with unemployment until it runs out. And one of the significant ones for our area, 

because we have had some companies close that were higher wage 

levels, I made more on my last job than your starting wage, and 

I’m making more on unemployment now, and, you know, I don’t 

need to get a job right now because I can use these benefits. 

Our county is comprised of about 43,000 citizens. About 20 percent of them are receiving some form of assistance or another, and 

that continues to grow. Our condition in our county is not uncommon; we hear this from other counties as well. But we do continue 

to have a vibrant manufacturing culture in our county. Our company, again, has been around for 72 years, and we, again, have 

been looking for people for years to do the work that we need to 

do. 

Again, in our area it’s far too easy to stay on benefits than to attempt to qualify for a job, attempt to transfer a job, and continue 

to hold that job. We have a significant issue in our area for people 

that will start jobs and not finish them because they will go back 

to benefits. 

We very much need help with this issue. We don’t need more 

training programs, we don’t need more assistance, we need willing 

workers that will take a job seriously, do not come to the job with 

drug and alcohol problems, and are willing to, you know, join the 

workforce, contribute to their communities, and offer tax base and, 

again, value to the community. They have to feel that work is more 

than just a job. So thank you. 

Mr. JORDAN. Thank you, Ms. Carter. 

[Prepared statement of Ms. Carter follows:] 

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Mr. JORDAN. Dr. Stone. 

STATEMENT OF CHAD STONE 

Mr. STONE. Chairman Jordan, Ranking Member Cartwright and 

other members of the subcommittee, thank you for the opportunity 

to testify on this important topic. I’ll summarize my written testimony, which falls into two parts, one focusing on the extraordinary 

macroeconomic situation in which we found ourselves since 2007, 

and the other focusing specifically on unemployment insurance. 

There is no doubt that the United States continues to suffer a 

serious unemployment problem in the wake of the Great Recession. 

Five years after the onset of the recession and 3–1/2 years after the 

economy turned around and began growing, there was still 3.2 million fewer jobs on nonfarm payrolls than there were in December 

2007, private payrolls are smaller by 2.7 million, and the unemployment rate hovers near 8 percent. 

You’ve heard testimony implying that much of this job loss can 

be traced to work disincentives in the 2009 economic Recovery Act 

that discouraged people from seeking or taking jobs. I, along with 

the Congressional Budget Office and, I believe, a large number of 

economists, have a different view; namely, that today’s unemployment problem stems from the sharp contraction in demand for 

goods and services in the Great Recession, and that the legacy of 

that recession continues to be an economic slump in which the demand for goods and services, gross domestic product or GDP, remains far short of what the economy is capable of producing with 

the existing business capacity and a labor force that includes people who are willing to work, but currently can’t find a job because 

the affect of weak demand on businesses for the most part is that 

they don’t have the sales to justify expansion. 

I don’t have PowerPoint for my charts, but the chart on page 4 

of my testimony reproduces a chart from the latest CBO budget 

and economic outlook illustrating the large gap, currently about a 

trillion dollars, that exists between actual demand for goods and 

services and what we could be producing on a sustainable basis 

with high employment and capacity utilization. That’s potential 

GDP. 

Congressional Budget Office projects that we won’t get back to 

high employment until 2017. That could be optimistic. The Recovery Act did not make the unemployment problem worse. CBO’s reports on its economic effects show that the 2009 Recovery Act had 

an important effect in keeping GDP from falling even further and 

unemployment from rising even higher than it did. Economists 

Alan Blinder and Mark Zandi have shown that aggressive actions 

by the Federal Reserve, and the financial stabilization and fiscal 

stimulus policies enacted in late 2008 and early 2009 averted what 

they say could have been the Great Recession 2.0. 

The problem is the policymakers took their foot off the accelerator too quickly and started to apply the brakes too fast to an 

economic recovery under the misguided view that budget austerity, 

especially austerity that focused on spending cuts, would be expansionary and good for the economy. We now know from the experience of Great Britain and the European community, and from revised assessments from the International Monetary Fund, and 

47 

other research that austerity is contractionary. And contrary to the 

view that government spending is, quote, ‘‘out of control,’’ fiscal policy has been contractionary for the past couple of years. 

I have another chart in my testimony on page 5 from a recent 

speech by Federal Reserve Vice Chair Janet Yellen that shows that 

Federal, State and local government purchases of goods and services—that’s the spending that gets into GDP—have exercised an 

unprecedented drag on economic growth in this recovery not just 

compared with the average of past recoveries, but also in contrast 

to the expansionary contribution that that spending made in the 

Reagan recovery and in the Bush recovery, and it’s very notable, 

the difference. 

That’s why it’s so important not to let sequestration take place 

as scheduled and to replace it with a more sensible approach that 

balances spending and revenue measures that do not exert such a 

sharp, immediate drag on the recovery, a drag that CBO estimates 

is about a half percent of GDP this year. 

Let me make just a couple of brief remarks about unemployment 

compensation in the Great Recession and the ensuing job slump. 

First I acknowledge that Federal emergency UI provided substantially more weeks of benefits than past programs did in previous 

recessions. That’s because the depth of the recession was much 

larger. As Roy Scheider said in Jaws when he first saw the shark, 

you’re going to need a bigger boat, and we needed a bigger boat in 

this case. 

Second, when jobs are scarce, the likelihood of finding a suitable 

job even with diligent search is much lower than it is when jobs 

were plentiful. Moreover, there are plenty of people looking for 

work who are not receiving UI. So if a UI recipient doesn’t take a 

job in this kind of environment, that opens up an opportunity for 

someone else. 

Third, in a weak economy, UI creates demand that wouldn’t otherwise be there, and that supports job creation, as the CBO reports 

on unemployment insurance and on economic Recovery Act have 

shown. 

Thank you, and I expect we’ll have a lively debate about incentives and how the economy works. 

Mr. JORDAN. Thank you, Doctor. 

[Prepared statement of Mr. Stone follows:] 

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Mr. JORDAN. Mr. Reece. 

STATEMENT OF STACEY G. REECE 

Mr. REECE. Chairman Jordan, Ranking Member Representative 

Cartwright, committee members, thank you for inviting me to testify before you today. I’m Stacey Reece, coowner of Spherion Staffing and Professional Recruiting. Spherion is a national recruiting 

franchisor, my market is located main office in Gainesville, Georgia, and the western part of North Carolina. 

The employees we provide to our clients don’t always meet their 

internal hiring criteria; therefore, we believe that the employees 

that we place, we give them an opportunity to work for an employer of choice to demonstrate that they are capable of meeting 

the employer’s hiring criteria and eventually becoming full-time 

employees of that client. We also belive we’re an economic barometer. We’re one of the first business sectors to fill an economic 

downturn and one of the first to see the economy recover. 

Prerecession we observed clients that were hiring temporaries 

permanently begin to keep them temporary. Next the clients suspended the hiring of any new temporary workers. It then escalated 

to waves of layoffs for temporary employees. That was followed by 

clients no longer needing temporaries. And then finally clients 

began the process of laying off their permanent workers. Our industry was devastated, much like the banking industry, the automobile industry, the housing industry, and the staffing industry 

did not receive any form of Federal assistance during that time. 

I would like to offer you insight into the almost daily obstacles 

that our recruiters deal with regarding our unemployment insurance program and the impact we see the system having on qualified and employable job applicants. And let me state for the record 

my testimony is not against providing any form of safety net for 

any unemployed American citizen. 

In late 2009, we began to see hiring returning to the economy. 

We were hit head on with a hurdle we didn’t anticipate. We had 

applicants applying for jobs, but only to protect status their for unemployment insurance. Just to turn down the job, applicants would 

use the regulation related to earning a reasonable percent of their 

previous pay. 

The reasonable distance to travel to work was also a factor utilized to turn down a job. If it was more than 25 miles, they didn’t 

have to take it. If it was 26.5, they didn’t have to take it. If it was 

19.5, then they had to consider it. 

Our staff believed that these applicants were possibly unemployable to begin with, but as they looked more closely, they found that 

most of the applicants were very skilled, capable, and had been on 

prior jobs for several years before being laid off. 

Prior to the recession clients were willing and able to pay wages 

that were above the prevailing market rates. We have found that 

the unemployed who are holding out and choosing to stay on unemployment now face the reality that those jobs will no longer pay 

what they once earned. They will look our recruiters in the eyes 

and state, well, I will just stay on unemployment. One of our clients that has multiple manufacturing, assembly and distribution 

facilities across the United States, and they employ thousands of 

57 

employees across the country, had this to say, quote: ‘‘We’ve actually had applicants say that they had done the math, and they 

were not willing to work for $10 an hour because their unemployment check, coupled with gas savings, lunch and uniforms made it 

more attractive to stay home.’’ The way they saw it, they would be 

working for $2.50 an hour above what they could get on unemployment, so they’d rather stay home. 

This client also interviewed a purchasing professional recently, 

and when the HR director asked him what had he been doing since 

he was laid off from his previous job, he just laughed and said, 

nothing, I’m a 99-weeker. They didn’t hire him. 

Our other clients state that applicants have told them similar 

stories. One says, I have no interest in getting a job because I can 

live off my spouse’s income until the full unemployment benefits 

run out. 

We believe the impact, the continuous extension of unemployment, has enabled people that are extremely talented and capable 

of working to continue to remain unemployed. These applicants are 

often bitter and irritated that they cannot simply go back to pre2008 times. In our markets these individuals are typically in the 

pay range of 9 to $12 an hour. 

Once an employee is offered permanent work with one of our clients, typically their pay goes up 8 percent, plus benefits, paid time 

off, a progression plan and training, all paid by the new employer. 

It is not only a win for the employee and the employer, it is a win 

for our economy. 

I believe we should stop the extension, implement a strict graduated system that would pay full benefits up to 12 weeks, and then 

gradually drop down maybe every 4 weeks after that until the benefits are exhausted. At that point if the individual is still unemployed, there has to be other viable Federal programs that support 

them, but remove the burden from the employer themselves. 

In summary, our economic system is not based on a workforce 

that believes it should be rewarded for not working, nor entitled to 

be maintained by the government. Our current state of economic 

affairs does not dictate that we ask our government to sustain our 

standard of living. It demands that we as American citizens reexamine our own values, our wants and our desires, and realize that 

we must face the reality of what today is, and adjust our lifestyles 

accordingly. 

I look forward to the committee members’ questions. 

Mr. JORDAN. Thank you. 

[Prepared statement of Mr. Reece follows:] 

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Mr. JORDAN. Ms. Carter, how many employees do you have at 

Carter Machine today? 

Ms. CARTER. Fifty-seven. 

Mr. JORDAN. And how many would you have—I mean, if you 

could find people to work and do the kind of expansion you want 

to do and think you need to do to meet your customer and clients’ 

demands, how many more people would you have working today if 

you could find those individuals? 

Ms. CARTER. Immediately we could use 70 to 75 people. 

Mr. JORDAN. Additional or 56 up to 75? 

Ms. CARTER. Up to 75. 

Mr. JORDAN. So another 20 people you are ready to hire today? 

Ms. CARTER. Yes. 

Mr. JORDAN. How much do you pay your folks? 

Ms. CARTER. Generally starting wage is 12 to $14 an hour. And 

they can earn—— 

Mr. JORDAN. So significantly above minimum wage. 

Ms. CARTER. Yes. 

Mr. JORDAN. Do you offer a benefit package? 

Ms. CARTER. Yes. 

Mr. JORDAN. Health care? 

Ms. CARTER. Health care, pensions, 401(k), lots of other little 

benefits in there. 

Mr. JORDAN. And you can’t find people. 

In fact, Ms. Carter and I were at a meeting in our district where 

we had nine employers sitting around a table. My guess is all of 

you, both sides of the aisle, had the same experience. We had nine 

employers sitting around the table. We went around the room, and 

I asked each employer how many folks they would hire that day 

if they could find people to work, who would pass a drug test, who 

would show up on time, who weren’t getting so much benefits, and 

giving the same kind of stories you and Mr. Reece related. Three 

hundred twenty-five jobs. And Ms. Carter from Galion, Ohio, 

Crawford County, a relatively small county in our district, 50,000 

population in the entire county, 325 well-paying jobs between 12 

and $18 an hour. So we are hearing this all the time. 

And I think you said in your testimony, Ms. Carter, 8 out of 10, 

80 percent, of the folks you interview say, you know what? I’d rather just stay on the benefits. It’s not worth me leaving the benefits 

and coming to work even for a job that starts at $12 an hour and 

has full benefits. 

Ms. CARTER. Right. 

Mr. JORDAN. So if that’s not a disincentive to work, I don’t know 

what is. It points to if we got 80 percent of the folks—now, think 

about it, we have 12 million unemployed people around the country. Maybe not 80 percent around the country, I get that. But Dr. 

Steuerle in his testimony talked about the depression that sets in, 

the loss of skill that sets in, the personal damage that happens to 

individual Americans when they fail to work for a sustained period 

of time. 

Dr. Steuerle, would you elaborate a little bit on that statement? 

And let me just start here first, too. Dr. Steuerle, you work for the 

Urban Institute? 

Mr. STEUERLE. That’s correct. 

68 

Mr. JORDAN. You don’t work for Cato, right? 

Mr. STEUERLE. No. 

Mr. JORDAN. You don’t work for the Heritage Foundation. 

Mr. STEUERLE. Urban Institute considers itself a nonpartisan. I 

testify often for both sides of the aisle. 

Mr. JORDAN. I understand. We’re glad to have you here. So if you 

can elaborate on the phenomena that Ms. Carter described in her 

testimony and Mr. Reece described in his testimony and how it impacts that individual. 

Mr. STEUERLE. Well, there’s no doubt that when people are unemployed, they acquire different habits. You and I would acquire 

different habits if we left Congress, if I left my job. 

Mr. JORDAN. Maybe get some good habits. I’m kidding. 

Mr. STEUERLE. There is a fair amount of evidence, for instance, 

by employers who pay workers comp that if they can interact 

quickly with the person who becomes injured, they are much more 

successful—— 

Mr. JORDAN. I hear that all the time. 

Mr. STEUERLE. —than the person who is laid off 6 or 8 weeks 

and other habits form. Now, I’m not saying they—I’m not saying 

in many case these people aren’t worthy of help and support. In 

most cases I think they are. But there is the issue about how 

quickly you intervene, and how you intervene, and how you interact with them. So there are costs there. 

We’ve also found just by the way that savings—we’re not talking 

about savings very much here, but you start dealing with an unemployed population, a population depending upon benefits, and it 

also impacts upon their saving behavior as well. 

Mr. JORDAN. Let me just take it one step further, because we’re 

focused on that individual and that family and the negative impact 

there, but it’s got to be broader than that. And it is something Ms. 

Carter related to me in her experience and what she sees in 

Galion, Ohio, but there’s a cultural, and community, and, frankly, 

nationwide impact to what’s going on here because it reflects on 

your entire community. People aren’t saving as much, which means 

they can’t spend as much, which means they are not getting the 

skills, they are not bettering themselves. It is a broad impact, I 

would argue, in a negative way for our entire culture. Have you 

looked at that—in your research have you looked at that as well? 

Mr. STEUERLE. I can’t say that I’ve looked at it adequately to say 

that I’m an expert on its aggregate impact upon our culture. I 

think in general my concern—there’s actually two concerns being 

expressed at the table here. Some are short-term, and some are 

long-term. In fact, a lot of what Dr. Stone said and Dr. Mulligan 

said is actually reconcilable. 

Dr. Mulligan and to some extent I have emphasized supply-side 

effects, tax rate effects, incentive effects. Dr. Stone has emphasized—I’m not saying there’s some disagreement there, but he’s 

emphasized the fact that this great financial depression caused a 

lot of unemployment that was probably unavoidable. So we might 

debate to some extent how much each one impacts, but they are 

both there, they’re both present. 

Mr. JORDAN. No one argued—I mean, Mr. Cartwright in his 

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tion inherited, no one argues that it was bad and headed in the 

wrong direction. The point here today is what was undertaken has 

not worked. I mean, I said many times if big government spending 

was going to get us out of this mess, well, for goodness sake, we’d 

have been out of it a long time ago because that’s all the government’s done for 4 years, at a record rate the largest stimulus bill 

in history, then piled on—more and more piled on top of that. So 

it just, frankly, hasn’t worked. That’s what we’re trying to point to. 

We understand it was a difficult situation for any administration. 

Mr. STEUERLE. My concern is not just with how to debate the 

past, but how to debate going forward. 

Mr. JORDAN. Well said. 

Mr. STEUERLE. Ms. Carter talks about the 20 percent of people 

that are on some form of assistance she has trouble dealing with. 

I—on the other side of my work, I deal with things like Social Security and retirement. We are soon scheduled to have close to a 

third of the population on Social Security alone. So add these numbers up, and we’re doing a great deal of finance consumption of 

peoples for very worthy purposes that I just think—I am not just 

saying we need to spend less money, I’m just saying I think we 

need to start emphasizing more work, saving and education to get 

the positive—— 

Mr. JORDAN. And you would argue—and I will go to our ranking 

member—a comprehensive approach. We know there are—our research says there are 70 different means-tested social welfare programs at the Federal Government your tax dollars are involved 

with. We might be better off and actually help families, help our 

culture, help our country if we didn’t have 70 different programs 

administered in the various agencies across the Federal Government working with the States if we focused that on a few that actually had a positive impact. That’s one of the things we’re trying 

to look at, and we’d appreciate your help even though you’re from 

the Urban Institute and not Cato or Heritage. I’m kidding, I’m kidding. 

Mr. Cartwright, you’re recognized for 5 minutes. No, you get 6 

minutes if you want. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

Dr. Stone, I want to thank you for coming here today, and I want 

to follow up on some of your comments. You mentioned the sequestration. Obviously sequestration is going to and it’s designed to impose across-the-board spending cuts to an economy that is still 

slowly recovering. This is likely to halt any further economic 

growth in the short term, and also impede any improvements to 

our unemployment rate, which is what we’re here talking about 

today. 

Now, economists, Dr. Stephen Fuller, examined the impact of the 

sequester and concluded that in 2013, it would cost the U.S. economy over 2 million jobs, decrease personal earnings by $109 billion, 

and reduce our Nation’s GDP by $215 billion. 

Now, Dr. Stone, I understand that Dr. Fuller’s Ph.D. Is from Cornell, and yours is from Yale, but is that something you can get 

past, and can you agree with Dr. Fuller on his statement? 

Mr. STONE. Well, I can certainly agree on the contractionary impact. I’m not sure his analysis didn’t include not only sequestraVerDate Aug 31 2005 12:06 Mar 08, 2013 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 C:\DOCS\79464.TXT APRIL
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tion, but also the budget caps that are already in, which might 

make it larger than what’s due to sequestration alone. CBO estimates that the sequestration would cut a half point or more off 

GDP. So there’s definitely contractionary effect. The exact numbers, that’s tough to know. 

Mr. CARTWRIGHT. And just so we’re all clear, you said austerity 

is contractionary. What does that mean about unemployment? 

Mr. STONE. It means that when you enact policies that raise 

taxes and cut spending in an economy where the Federal Reserve 

has limited ability to offset it with interest rate cuts, and in an 

economy where there’s already a lot of unemployment, unemployment goes up, and GDP goes down. 

Mr. CARTWRIGHT. Now, the White House has released a fact 

sheet on how the sequester would impact jobs and economic security. This fact sheet identified emergency unemployment compensation as one program that would see significant reductions itself. 

These cuts wouldn’t only hurt the long-term unemployed as they 

search for permanent employment, but they also slow economic 

growth as the result of a corresponding reduction, as you said, in 

demand for goods and services. 

Dr. Stone, in your testimony you state, and I’m going to quote 

from your submitted testimony, ‘‘A good place to start would be to 

replace sequestration with a balanced package of tax and spending 

measures that do not exert such a sharp, immediate drag on the 

recovery.’’ And that’s the end of the quote. 

Dr. Stone, why is it important that deficit reduction measures 

are carefully designed—— 

Mr. STONE. Well, for the reasons that your first question raised, 

that if they’re not carefully designed, they impede the economic recovery. We can achieve significant deficit reduction. My organization has estimated we need about $1–1/2 trillion more over 10 

years to stabilize the debt relative to the size of the economy. And 

if we try to do it all now, we’ll have that austerity as 

contractionary problem. But if we phase it in, we can still get to 

where we want to go with respect to deficit reduction without hurting the economy in the short run. 

And can I just say about unemployment, unemployment insurance has, in fact, been coming down. There are probably about 5 

million people out of the 12 million on unemployment insurance 

now, so that means that there are a lot of people who might be 

showing up for work who are not on unemployment insurance, and 

certainly the high school students who don’t have a good work 

ethic, unemployment insurance isn’t the problem there. So it’s a 

bigger deal than just the unemployment insurance. 

Mr. CARTWRIGHT. Well, thank you for those comments. This is 

not the time for broad cuts to programs intended to support the unemployed. Cuts like that are projected to worsen the economic outlook and the hardships faced by the unemployed that I think all 

of you agree on. 

Our economy is recovering, we’ve seen 35 months of job creation, 

but the sequester cuts and the uncertainty associated with them is 

going to put a significant drag on our American recovery and negatively affect the number of jobs available. If we in Congress are serious about making sure our Federal Government is effectively adVerDate Aug 31 2005 12:06 Mar 08, 2013 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 C:\DOCS\79464.TXT APRIL
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dressing unemployment, we have to avoid these broad cuts and instead focus our efforts on investments that stimulate the economy 

and create jobs. 

Thank you, Mr. Chairman. I yield. 

Mr. JORDAN. Thank you, Mr. Cartwright. 

Mr. Reece, do you think the Federal Government has taken its 

foot off the accelerator? Do you think it’s been practicing austerity? 

Just your gut reaction. As a successful business owner, do you 

think the Federal Government’s been spending less money? 

Mr. REECE. No. 

Mr. JORDAN. No. 

Ms. Carter, do you think the Federal Government’s been spending less money? 

Ms. CARTER. No, just in the wrong place. 

Mr. JORDAN. Well, you would be right, because we are spending 

a trillion dollars more as a Federal Government than we were 

spending in 2007, so this idea that we’ve been practicing austerity 

is just not the case. 

With that I would yield to Mr. Collins from Georgia—or I’m 

sorry, Mr. DesJarlais is next, and then Mr. Collins. 

Mr. DESJARLAIS. Thank you, Mr. Chairman. 

Thank you all for being here today. This is really kind of an 

amazing subject. It certainly should be a bipartisan subject because 

we all are struggling with these high unemployment rates, but yet 

to hear this testimony, there are jobs out there, we just got to figure out a dollar value right now that can compete against the Federal Government in terms of unemployment. 

Just like Chairman Jordan, in my district I visited with several 

employers that right now could hire people. We have a rural area 

that $10, $12 an hour is not enough to entice people off their unemployment to go to work, and that is with benefits. So certainly 

we see the same frustration. 

It is something that—I look at why is this happening? We all get 

frustrated at people and say, you know, why are they gaming the 

system so to speak? But yet it’s human nature to take things for 

free, right? I mean, if we all go out to a restaurant, a fancy restaurant, and we eat and we’re full, and the waitress comes by with 

the dessert tray and says, hey, would you like dessert? If it costs 

8 or $10, you’re going to say no. But if she says, hey, it’s free tonight, you’re probably going to take some even though you really 

don’t need it and you’re not hungry. 

So that’s kind of what’s happening to the American society is the 

government is just offering up all this free stuff. So we need to 

work from within, and we need to work on both sides of the aisle 

to solve this problem. 

Dr. Mulligan, you have much more eloquent ways of putting this, 

but really the safety nets that are supposed to be there for people 

who need it have really turned into hammocks under the Stimulus 

Act; would you agree? 

Mr. MULLIGAN. We all wish we were in the spot that we could 

just ignore all these programs. Remember, unemployment is not a 

median experience. Unemployment you can measure, you call it 12 

percent, 14 percent. Most people are not unemployed. And something bad’s happened in your life, and you’re in that spot, and it’s 

72 

not a hammock time of life, but sometimes your best choice in that 

bad spot is to let the government help you rather than let Ms. 

Carter or Mr. Reece help you. 

Mr. DESJARLAIS. Psychologically laziness breeds laziness. It’s 

much better to be busy. No one likes to sit and watch the clock tick 

by, it’s very boring. But as you said, if there’s a struggle, if you’re 

not in your chosen vocation, it’s hard to, you know, go to a job that 

maybe is distasteful, so you get caught in this trap. And I think, 

Doctor, you were also referring to that; is that correct? It creates 

a pattern of disincentiveness. 

Mr. STEUERLE. That’s right. Again, I want to be very careful. I 

think what we’re trying to achieve here is a balance act, and I 

think there are ways in which we can meet some of, say, the demand concerns that Dr. Stone so eloquently raises, but by doing 

them in ways that tend to subsidize jobs more than, for instance, 

just subsidize either unemployment or in some cases just general 

tax cuts, like the across-the-board Social Security tax cut that everybody in this room benefited from, but probably had very—you 

might argue that it slightly increased our demand. It might have 

been better to have some of that money go to help people get jobs. 

Mr. DESJARLAIS. Ms. Carter, you shared several stories about 

why people couldn’t work. I think my favorite was a while back last 

year when we were deciding whether to extend unemployment, and 

I saw on a Facebook where somebody was telling their friend that 

it looks like they wouldn’t be able to go fishing with them on Monday because his wife had scheduled him a haircut because it looked 

like they were serious about not extending unemployment this 

time, and he was going to have to go look for a job. 

You know, I wish that was a joke. But I saw several references, 

and that’s what you were saying is that people just are just not 

incentivized right now to go get this. So it’s our job to protect those 

who are really in need of these safety programs. We don’t want 

anybody to suffer, we don’t want anybody to do without, we don’t 

children not to be fed. 

But the bottom line is we know that these programs are being 

abused; we just can’t agree on what extent they’re being abused. 

And it seems like any time we try to make a correction here in 

Congress, we get into an argument over maybe the Republicans are 

trying to do too much, and the Democrats are trying to protect too 

many. But somewhere there’s got to be some common ground here 

because we know that these entitlements are driving our debt. We 

know health care is a major driver. We know entitlements are a 

major driver. 

So I really appreciate this hearing today because this problem is 

obvious, it should be a bipartisan solution, and we need to find a 

means to rein back these basically entitlements and disincentives 

for people to get back to work. So I know I’m stating the obvious, 

that that is the problem that’s before us. Does anybody have any 

quick solutions, anything that you would recommend? I will just 

open that to the panel. 

Yes, Ms. Carter. 

Ms. CARTER. We’re not saying that there shouldn’t be benefits or 

that they should be eliminated, but there has got to be some accountability by employees, potential employees, that when we have 

73 

such a great number of jobs available in our county, why is it an 

option to not take a job? There has to be some accountability there. 

They have to apply for jobs. If there’s jobs available, people should 

be taking jobs. 

People that currently work become more and more resentful of 

people who do not work who are supported off of a system when 

you have many Americans who work as hard as they can, and everybody knows somebody that’s taking advantage. 

Mr. DESJARLAIS. Okay. And my time has expired, but I think 

what you’re saying is that we need to promote a society that promotes accountability and responsibility, and we are getting away 

from that. Thank you. 

Mr. JORDAN. Thank the gentleman. 

I now turn to the gentleman from Virginia Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

And I must say from the conversation I’ve just heard, I have a 

sense of deja vu all over again. One wants to know why President 

Obama won the reelection and why Mr. Romney lost. The idea that 

people who are unemployed, it’s their own fault and they are takers, and unemployment insurance to provide a safety net for them 

is a disincentive to work. Well, good luck with that theory, but I 

can tell you it didn’t play in this country. 

Let me ask, Dr. Mulligan and Dr. Steuerle, if I understood your 

answer correctly to Mr. DesJarlais, do you subscribe to the theory 

that ipso facto unemployment insurance actually serves as a disincentive to employment in this country? 

Mr. MULLIGAN. Yeah, I’m not here to testify to what’s politically 

correct. I’m here—I’m an economist. I’m an expert on the economy. 

Mr. CONNOLLY. I know. I’m asking you about your answer, Dr. 

Mulligan, to Mr. DesJarlais. 

Mr. MULLIGAN. It is a disincentive. It is a disincentive. It reduces 

aggregate employment, it reduces aggregate spending. It may by 

worth it for helping people, but helping people is not free. You have 

a price. You want to help people, you’re going to shrink the economy. 

Mr. CONNOLLY. So the reason we have 7.9 percent unemployment 

in part is because we have the safety net of unemployment insurance? 

Mr. MULLIGAN. It’s the totality of the programs of which the biggest piece would be UI, yes. 

Mr. CONNOLLY. So would it be your belief that we should therefore abolish it because it serves as a disincentive, based on your 

testimony, to job creation? 

Mr. MULLIGAN. I’m sorry, I thought I was clear about that. I said 

we absolutely must have taxes and safety net programs even 

though they discourage work and subsidize layoffs. 

Mr. CONNOLLY. Why would you want something that discourages 

work? 

Mr. MULLIGAN. Maximizing work is not everything. There’s 

trade-offs in life. You want to help people but you want to have the 

economy strong, and there is a trade-off. What I have said is what 

has happened in the last couple of years is we have moved in a direction of really too much help and not enough efficiency. 

74 

Mr. CONNOLLY. Well, Dr. Mulligan, I’m just trying to follow your 

train of thought. If, as you say, it is a disincentive to job creation, 

or to working, what kind of help is that? I mean, why would you— 

I don’t understand why we would want to support something like 

that. 

Mr. MULLIGAN. Something called moderation. Let’s bring, maybe 

bring up my chart. My chart showed a bar and indicated the 

amount of disincentives, okay. One hundred percent is too much. 

Mr. Tobin explained this. One hundred percent is overboard. It 

shouldn’t be zero either. It should be somewhere in between 100 

and 0, and we have gone in millions of cases over 100. And that 

is overboard. It is not a balance anymore between two goods. It’s 

gone overboard. 

Mr. CONNOLLY. Dr. Stone, do you agree with that analysis? 

Mr. STONE. I do accept that one of the many effects of programs 

like unemployment insurance and programs that phase in and 

phase out like SNAP, one of the effects is a disincentive to work 

effect. That is one of many effects, and it is not necessarily the 

overwhelming effect. If there are some cases where there is 100 

percent marginal tax rate on work, then that is potentially a problem. But you know, I would have to look at those data. 

Now, what Professor Tobin was talking about, who actually was 

a professor of mine in graduate school, was back in the time we 

were talking about a negative income tax of the sort that Milton 

Friedman from the University of Chicago was recommending, and 

that was kind of along the lines of what Dr. Steuerle is talking 

about, which is instead of a whole collection of programs, there is 

a straight set of income support, one program. 

Now, we probably need more than one program, but, so, yes, 

there is some disincentive effects. They are nowhere near as large, 

for the most part, or as prominent in people’s decisions as we might 

think. 

Mr. CONNOLLY. Are you aware of empirical, in your own studies, 

empirical data that it in fact serves as a disincentive to job creation 

in the aggregate? 

Mr. STONE. Studies have found some minor job, minor disincentive effects, but not at 100 percent for the typical situation. And as 

Dr. Mulligan said, there is a trade-off. You don’t want to get rid 

of the safety net. You don’t want to have huge disincentives, and 

we don’t have huge disincentives for the most part. 

Mr. CONNOLLY. Well, I leave unsatisfied because I hear from the 

right and the left a sense of dissatisfaction. I would like to know 

a lot more empirically about whether we have got data that in fact 

can support such a contention. And if so, then why in the world 

would we maintain an unemployment insurance program. 

Mr. STEUERLE. Mr. Connolly, can I just jump in one—— 

Mr. CONNOLLY. If the chairman will allow it because I have 

now—— 

Mr. JORDAN. Yes. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. STEUERLE. We had a similar debate about welfare recipients 

for some time, about 10, 20 years ago. And one result of that debate was we actually boosted something called an earned income 

75 

tax credit. Our earned income tax credit also has some negative 

disincentives. 

Mr. CONNOLLY. I believe that came out of the University of Chicago, Dr. Mulligan. 

Mr. STEUERLE. Yes, but if I could finish, and just to defend myself, I don’t consider myself on the right or left on this at all, I don’t 

consider my employer as being on the right or the left, is I was one 

of the people in the Tax Reform Act. I was coordinating in Treasury. We put forward the first major increase in the earned income 

tax credit. It’s from the Tax Reform Act of ’86. Gradually, that increased earned income credit allowed us to displace a welfare system that had more negative work disincentives. And I think that 

combination of trade-offs helped solve problems from both left and 

right because we got more work—less work disincentives, not more 

work incentives, but less work disincentives than we had in the 

welfare system, but yet we managed to be able to maintain a base 

of support for people in need. So I think there are ways this committee could work on compromises that cut across this issue. 

Mr. CONNOLLY. Thank you. Mr. Chairman, thank you for your indulgence. 

Mr. JORDAN. You bet. It seems to me we have got three economists talking about what Mr. Mulligan initially said, which is there 

are trade-offs, and why we want some kind of safety net. I think 

both sides agree with that. There comes a point where the safety 

net incentives are not what we need to maximize employment and 

maximize economic growth. 

Dr. Stone, real quickly, now—I want to try to get two more in 

before we vote. 

Mr. STONE. Fifteen seconds. Most of the empirical evidence I 

have seen about unemployment compensation in this recent Great 

Recession is that only a very small part of unemployment is due 

to the safety net program, or due to the unemployment insurance. 

Mr. JORDAN. I think Mr. Mulligan’s research shows that 4 million have a complete disincentive to going back to work based on 

unemployment and a host of other things, and that would be, if my 

quick calculation is right, one-third of the total unemployment 

number out there. So that is pretty significant. 

Mr. DesJarlais, a quick statement and then we have got to votes, 

but I wanted to give 5 minutes to Mr. Collins. 

Dr. DESJARLAIS. This is in response to Mr. Connolly. I was not 

trying to sound uncompassionate. Penalizing people for working is 

not compassionate. We need to rethink and restructure the way we 

administer our social safety nets so that we are actually empowering people rather than dooming them to dependency, and that 

was my point. 

Mr. JORDAN. No, well said. I think we have enough time. Mr. 

Collins a quick 5 and then I want to get—Mr. Horsford was actually supposed to go first. I wanted to give you a chance before we 

go vote if we can. The gentleman from Georgia. 

Mr. COLLINS. Thank you, Mr. Chairman. I think one of the 

things that is important especially from my background is uplifting 

people and empowering them to do work that they feel good about, 

work that they can be encouraged, and also, you know, have a job 

that they can look forward to going to—— 

76 

Mr. JORDAN. Would the gentleman yield for just one second? 

Mr. COLLINS. I will always yield, Chairman. 

Mr. JORDAN. Just for those members leaving, we will reconvene 

at 3:40, for just—if you want to come back for question, I want to 

give you plenty of time. We will do that. The gentleman can proceed. 

Mr. COLLINS. Thank you, Mr. Chairman. And just following 

through that, is we have got to provide those—Dr. Steuerle, you 

mentioned something in your testimony that talked about that the 

government policies have led to significant long-term unemployment over time. But it also, the thing that interests me the most, 

and I think something that we are missing here, instead of getting, 

you know, focused away from where it actually—how we do help 

people and then how we empower them to be all that they can be, 

so to speak. And you mentioned the long-term consequences of prolonged unemployment in your testimony. I would like for you to 

elaborate on that a little bit more, and especially from the incentive, not only the incentive side, but what people lose by not being 

employed. 

Mr. STEUERLE. Well, that’s why I have much to add to what I 

already said in terms of habit formation and the consequences for 

depression and things like that. But in point of fact, the main way 

that most of us learn is on the job. We also think of education taking place in the school, but in fact, when you go work for Mrs. 

Carter—Ms. Carter, you actually end up getting educated as you 

stay on the job and that is one reason over time she is able to promote you to higher levels of work. So you are not only losing some 

human capital by being unemployed, but you are losing that educational opportunity that you would have on work. 

Again, I don’t want to say, and let me be clear, most people do 

not want to be unemployed. I don’t want to—I don’t indicate by any 

means this is something people want. I just think we need to figure 

out ways to be able to help them more. 

Mr. COLLINS. Exactly, and I think, that’s my point is, is people 

want to work. I believe that that’s the genius of the American system, that we want to work. We want to provide those incentives, 

and I think that you are providing something that, that sometimes 

we miss in what we do lose for those who are actually working. 

And Ms. Carter’s place is a place to do that. You learn more than 

just a job skill. You learn life, and I think that is so important. 

One quick question, and I may come back in just a second. Mr. 

Reece, one of the things that you had mentioned in employment, 

is you talked about the cost that they would actually in some ways 

do the cost-benefit analysis, I mean, which is a complex thought 

process to go through. So what you really saying is they are not 

qualified—they are not unqualified for the jobs that you could be 

providing. 

Mr. REECE. No, they are very qualified individuals. My belief, 

and the doctors here are talking about statistics and that is great, 

but I actually know the statistics. They come in my office and meet 

with my recruiters. And they are hung up on what they had accomplished in their lives at a certain point prior to the recession. And 

their irritation comes that they can’t get that same thing. They 

can’t get the $15 an hour job today, but they could get the 13 

77 

hour—dollar-an-hour job. And until they are forced, and I hate to 

use that harsh word, but until they are forced to do something, 

much like a parent sometimes has to force their child to do, then 

they are going to continue to use those benefits until the day they 

run out. 

It is human nature to want—to not go backwards in life. But at 

some point in time, I think we as people have to make a decision. 

Am I better off stepping back just a little bit, taking a lower pay 

rate to go to work for Ms. Carter and letting her train me to be 

something better? She is investing in me, but I’m going to have to 

invest in her as an employee. 

Mr. COLLINS. It goes back into the maturity cycle as we move forward, and I think people do want to work. And I think that’s what 

I want to emphasize here. This is not a negative hearing. This is 

a positive hearing in terms of what we can do. And really, and Dr. 

Steuerle, following up on that I love the academic and real world. 

It is almost like a reality TV show here, you know, we have this— 

and one of the things, Dr. Stone, I would like for you to blame, or 

maybe blame is probably not the right word, but discuss the fact 

of the constriction of the economy, the constriction of the economic 

forces going along as a higher reason for why there is up and down 

employment. And there is other things we can talk about, disability; there’s other things that can go along with this, which have 

grown, amazingly, when jobs were low. It seems like there is a bad 

correlation there. When disability claims have all of a sudden now 

skyrocketed when jobs are available. I ask you, how do you reconcile the research that you have done with the real world sitting 

right besides you on each side in the sense of just taking it from 

a constriction standpoint, and not just the sense that we are—there 

may be other things involved here? 

Mr. STONE. I have no doubt that people have shown up saying 

I would like to stay on unemployment and keep—rather than take 

a job. I have no doubt that some small businessmen cheat on their 

taxes. I mean, these kind of things go on, and there is a balance 

of can you—we don’t have the resources to enforce the—we have 

chosen not to invest in the resources to support the requirement 

that you search for a job, things like that. Our unemployment—— 

Mr. COLLINS. Well, okay, as far as enforcing a requirement to go 

get a job, I mean, that’s the intuitive part here. I mean, that is a 

problematic, you know, issue here, and I know my time is running 

out, but I’m—to say to them to put money to enforce that, really, 

sort of defeats or adds to the problem we are talking about. 

Mr. STONE. Well, and might not be worth spending just as we decide how much we want to spend with IRS audits versus accepting 

a certain degree of—— 

Mr. COLLINS. I understand. All right, I think it is a positive discussion. I think it is a first step. Thank you, Mr. Chairman. 

Mr. JORDAN. Thank you. Mr. Horsford, we have 5 minutes and 

21 seconds in this vote, but they always go long because there is 

only 88 people who have voted. So you can take your full 5. You 

can take part of it and come back, but that is up to you because 

I took you out of order. So are you up. 

Mr. HORSFORD. Thank you, Mr. Chairman. I appreciate very 

much the panel, and I know people come from a broad perspective 

78 

on this. Prior to coming to Congress, I ran the Culinary Training 

Academy in Las Vegas that trained thousands of people for careers 

in partnership with 26 of our largest employers in Las Vegas. And 

I know, without a doubt, after 11 years of doing that work, that 

people want jobs. They do not want to be on food stamps. They 

don’t want to be on long-term unemployment. They don’t want to 

rely on assistance. They want a job. But for those individuals who 

cannot find a job, they also need to depend on unemployment, and 

other work supports in order to survive. 

And so I would like to just reframe a bit of the discussion, because I think we have focused so much on a disincentive to work. 

I would like to focus on an incentive to survive. And the fact that 

people who are unemployed, Nevada has higher than the national 

average unemployment. My unemployed constituents are not lazy. 

They are not immature. They have a desire to work, but our economy is not producing the types of jobs that they are trained or 

skilled to do right now. 

And so my question is, how can we balance those interests, Dr. 

Stone, to provide us assistance that allows people to buy food, pay 

their rent, and you know, provide for the basic necessities for their 

family as a bridge until they are able to find employment? 

Mr. STONE. Well, the point of most of our, and the way most of 

our safety net programs work these days is that there are strong 

work requirements attached to them, and large numbers of SNAP 

recipients have good work histories, are tied into the labor force. 

They fall on hard times; they go on SNAP. It is not like it is perpetual not in the workforce. Now, there is two issues. There is the 

short-run issue that this economy is really in—still in tough shape, 

and the income support is important, and more important when it 

is harder to find a job than when it is easier to find a job. These 

incentives, as Dr. Steuerle said, you worry about incentives when 

the economy is in strong shape and there is plenty of jobs available 

and people are discouraged from working for one reason or another. 

We have done a lot in our social safety net to minimize that outcome. So I think that the trade-off is that we want to make sure 

that people who truly fall on hard times have the support they 

need to get through, and that includes unemployment insurance for 

people who lose their jobs through no fault of their own. 

Mr. HORSFORD. What about the concept of—for those who have 

worked? We have a program that trained people to be guest room 

attendants, food servers. I recall this one woman, she worked for 

20 years in the same job and became displaced and did not know 

how to really go about applying for jobs, or to market her skills, 

or to transfer those skills. So what about that within the framework of this discussion today? 

Mr. STONE. Well, that’s an important thing. And that’s why job 

counseling for unemployed workers can help them have a realistic 

view of what their job opportunities are, have a realistic view that, 

you know, jobs matter, strengthen that, but that costs money. And 

so there’s that tension between the budgetary cost of us having 

more job counseling and the fact that it actually could be helpful 

in the kind of situations we are all talking about. 

Mr. HORSFORD. Yeah, I think, Mr. Reece, you hit on it. Like 

sometimes we had to counsel people that the job that they wanted 

79 

to do wasn’t going to be readily available; construction, for example, which was our number two industry, there just wasn’t those 

jobs. 

Mr. REECE. Right. 

Mr. HORSFORD. And so to help people understand that, yeah, you 

might have to go back and retool your skills, and that might mean 

you are going to get paid a different wage when you get placed, but 

at least getting you training, and then placement into a new career 

field is something that has to be part of the equation. So you know, 

I understand that, but that’s—sometimes it takes a professional 

person who can provide that unemployed individual that perspective. 

Mr. REECE. Right. And if I could comment just quickly to that. 

You are exactly right from the standpoint that the person has to 

be counseled. But when a client expects you to provide them with 

the best possible applicant, oftentimes the reluctance that our recruiters see in that person as they are trying to encourage them 

to take the lower paying job, and to take the employer’s training, 

when you see that lack of interest, and then you have someone else 

sitting over here that is looking more attractive to place, you tend 

to give the client the more attractive looking applicant, the one 

that has the higher skill level. So sometimes without that eagerness to want the job, our recruiters are sometimes reluctant to recommend them for the job. 

Mr. HORSFORD. Thank you, Mr. Chairman. I will finish there. I 

would say I would love to—hope that we can talk about the chronically unemployed and the fact that there are actually laws on the 

books in some States that are disincentives to employers hiring the 

chronically unemployed, and we need to have that discussion as 

part of this as well. 

Mr. JORDAN. Yeah, we will reconvene at 3:40 and we can bring 

that issue up and a host of others. Thank you all for being here. 

So we are standing in recess. 

[Recess.] 

Mr. JORDAN. The committee will come to order. We appreciate 

our panel’s patience, and we will start with the gentlelady from Illinois, Ms. Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. I have been somewhat aghast at the tone of this hearing, and being a freshman 

Member, perhaps I will learn over time. But you know, my father 

who worked from the age of 14 and lied about his age to enlist in 

the Marine Corps and build a life, lost his job at 55 and was on 

unemployment insurance for a very, very long time. In fact, he 

maxed out his benefits. And he didn’t not find work because he was 

lazy. He did not find work because he did not have a trade or a 

skill. He was a business executive. He couldn’t find work because 

he was 55 years old, and no one would hire him because he was 

overqualified. 

I watched that man collect grocery carts to return them for $0.25 

a pop. This is an honorable man. I was on food stamps, and oftentimes those food stamps provided the only meals that I ate 

throughout my teenage years. I hope you don’t think that I look 

like someone who is lazy and on government handouts. 

80 

I have a question, Ms. Carter. You, in your testimony, you said 

that: ‘‘We have reached a point in society where it is no longer honorable or desirable to learn and perfect a trade skill.’’ You also say 

in your testimony that: ‘‘An unintended consequence of benefits is 

substance abuse.’’ 

And I’m going to ask you two questions. The first one is with regards to receiving government benefits being linked to substance 

abuse. Do you have children in college, or did you go to college and 

receive Pell grants, or subsidized student loans or anything like 

that yourself? 

Ms. CARTER. No. 

Ms. DUCKWORTH. You did not? 

Ms. CARTER. No. 

Ms. DUCKWORTH. Do you think then for other people’s children 

who are on Pell grants that we should have them give a urine sample prior to receiving those government funds for education? 

Ms. CARTER. I didn’t say anything like that. That is not anywhere near what my testimony was about. We have a problem in 

our county. We do not have enough employees to fill jobs. We consistently hear unemployment is so high. There’s no jobs. There’s no 

jobs for the middle class. We have jobs. We don’t have workers. 

Ms. DUCKWORTH. Your testimony actually says, and I’m reading 

it verbatim. ‘‘An unintended consequence of benefits is substance 

abuse.’’ I think that—— 

Ms. CARTER. That’s true. 

Ms. DUCKWORTH. I think there are many people who receive benefits who are not drug addicts and are suffering—are abusing 

drugs. 

Ms. CARTER. My statement doesn’t say 100 percent of people are 

on—have drug problems. In our county we have a significant drug 

problem. When employers release people because they test positive 

for drugs, they have accidents in the workplace, they are accepted 

into the unemployment program with no questions. That doesn’t 

correct their problem, and it doesn’t support unemployment. 

Ms. DUCKWORTH. And I—you know, I have worked with veterans 

for a very long time, and veterans are a community with a very 

high unemployment rate. I think for the 20 to 25-year-old age 

group, it is twice as high as the same age group in the general population. And I would think that they have perfected a trade and 

a skill, and that they are very honorable. So I don’t understand 

how we say, how we connect people who are on unemployment who 

are on unemployment because they are there through no fault of 

their own, are people who are not willing to find a trade or accept 

employment, when I know many, many, many thousands of veterans try very hard to find employment, and no one will hire them. 

Yet, they have a trade and a skill. 

Have you tried to hire veterans specifically and tried to recruit 

among the veteran community? 

Ms. CARTER. I believe that we have. We haven’t personally. We 

place ads if we are looking for people. We work with our local job 

and family services unit to have—make a match with someone who 

is looking. Again, we don’t have those people applying for jobs. We 

can place an ad and have zero people apply for an ad—for a job. 

81 

Ms. DUCKWORTH. And then you think that is probably because 

they are out using drugs and not wanting to develop a skill and 

not because you have not done a good job of reaching out to a community like veterans who have extremely well trained, who are extremely well trained in trades and certainly have been able to perform in some pretty severe conditions? 

Ms. CARTER. You are misrepresenting what I’m saying. It is not 

about 100 percent of people. It is about a large percentage in our 

county that have these issues, and again are being supported by 

government programs. And if—there are definitely people that require the assistance. Nobody has said that’s not the case. But there 

is also, again, a grand case—cases of abuse, and again, we are trying to grow the economy. We are trying to provide jobs. 

Ms. DUCKWORTH. I’m sorry, I have to interrupt because I’m running out of time. So do you think then that we should only drug 

test those people that have a problem, or are you saying that we 

should drug test 100 percent of people who are on unemployment? 

Because if it is not 100 percent of the people that have the problem, why would you trust 100 percent of them? 

Ms. CARTER. I’m saying that the government should not be providing benefits to people who are spending the money on drugs and 

that are not providing—are not working. 

Ms. DUCKWORTH. I’m out of time, Chairman. 

Mr. JORDAN. You can take some more if you like. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. My next question 

is for you, Dr. Stone. 

One of the things that I have been able to work on that I’m very 

proud of in the State of Illinois is actually incentives for employers. 

I think that employers who hire someone who has been unemployed for, for example, more than 6 months, or employers who 

hire someone such as a veteran, should be rewarded, should be rewarded for taking that chance because when you have someone 

who is an infantryman, it is hard to figure out how an infantryman 

is going to fit into your business, or how someone who fixed tanks 

will fit into your business. 

Could you talk a little bit about a different type of program, perhaps not the unemployment insurance, but how you would think— 

how you feel the effects of incentives for employers—in Illinois, we 

provided, when I was a Director of Veterans Affairs, $600 per every 

employee who was a veteran that a company hired. It is up to 

$5,000 now. Could you talk a little bit about the employer benefit 

side to reward employers for hiring the unemployed? 

Mr. STONE. Yeah, and that’s a good question—that’s a very good 

point that you raise, because we talk about some of the problems 

of the long-term unemployed or the people who don’t look that attractive when they present themselves to the employer. And if the 

employer can be given some incentive to take a chance on that person, which is the way I interpret how your program works, then 

there is going to be a good percentage of those people that they 

take a chance on that are going to turn out to be better workers 

than they look like they are, but they need the chance. 

Ms. DUCKWORTH. Thank you. Dr. Mulligan, could you speak a little bit from an economist’s perspective on incentives for employers 

82 

and how you feel that might work in terms of helping with the unemployment problem? 

I mean, if the insurance is not, you know, the unemployment insurance is not the answer. 

Mr. MULLIGAN. Incentives for employers, you know, fit into the 

calculus. I talk about the reward to working and it includes fringe 

benefits. Things that come on the employer’s side. So if there were 

a subsidy for hiring, that would increase hiring. And if there were 

a subsidy for having people on the payroll, that would reduce layoffs. That would—it would have those kind of effects. And as economists we kind of know how to quantify that. Until you tell me how 

big the program is, I can’t tell you how big the effects will be, but 

I know the direction. 

Ms. DUCKWORTH. Thank you. Thank you, Mr. Chairman. 

Mr. JORDAN. I want to thank the gentlelady for her questions 

and for her service and your family’s service to our country. We 

certainly appreciate that. 

It seems to me we have got this quandary. I would agree with 

what both sides of the aisle said. Most people do want to work. 

They want a job. But yet, the incentives are such that if the real 

world experience that Miss Carter related in her testimony, I believe was 8 out of 10 people she interviews for potential employment at her company decide that it is just not worth it, even 

though it is $12 an hour starting pay plus benefits. 

So that’s what we are trying to get at. And I love the graph that 

I think Dr. Mulligan put up where it shows that, you know, most 

people want to work, but they are also rational, smart people. And 

if in fact going to work means they are going to lose financially, 

then that is the quandary we are in and we have got to try to address that. 

Let me just do a couple of questions for Mr. Stone, excuse me, 

Dr. Stone. You talked about a balanced approach to dealing with 

our problem. So do you—you support raising taxes on who, and if 

so, how much? What kind of tax increases would you employ? 

Mr. STONE. I support looking at the tax expenditures, the tax 

loopholes. That gets talked about in the context of—— 

Mr. JORDAN. Which ones specifically are you referring to? We are 

all against loopholes. That sounds like something bad, but tell me 

which specific ones you think make sense. 

Mr. STONE. That’s a tough decision because—— 

Mr. JORDAN. But you have got to have—— 

Mr. STONE. —as witnessed by the fact that we still have all of 

those loopholes. 

Mr. JORDAN. Yeah, you’re—but I mean, you don’t have the political implications that we, you know, we might have as Members of 

Congress. As an economist, which ones specifically would you get 

rid of? Which expenditures, loopholes, whatever, credits, deductions, which one would you go for? 

Mr. STONE. Look, on economic grounds, the big ones are the 

hardest to do politically, employer healthcare, the home mortgage 

deduction, all those things are ones that you want to look seriously 

at. That’s where money is, but those are politically tough, and 

economists have problems with them. Economists have recommended alternative ways of approaching that issue, but—— 

83 

Mr. JORDAN. Do you support raising marginal tax rates? 

Mr. STONE. We supported letting all of the upper-income Bush 

tax cuts expire, so yes. 

Mr. JORDAN. So you supported raising taxes on middle class, and 

in effect, business owners like Miss Carter who is an LLC or not 

a C Corp? 

Mr. STONE. Our—a lot of people’s definition of middle class would not go to $400,000 a year. 

Mr. JORDAN. Do you support additional revenue from that, so 

let’s say you would have got all of those tax increases that you 

were—the 2001, 2003 tax increases would have expired, those tax 

cuts would have expired so, in essence, raising taxes on all of those 

brackets, what additional taxes aside from loophole, or do you support additional marginal tax increases? 

Mr. STONE. We don’t have a program of tax increases, or a program of spending cuts. 

Mr. JORDAN. What I’m trying to get at is, you talked a lot about, 

you know, contractions and things that would contract the economy. It seems to me, and you talked about how government spending is—we have been austere. I mean, I would argue the last thing 

we have been is any type of austerity in this government. We have 

never seen so much spending. But you talked about contraction, 

how that impacts demand, how that impacts the economy. Raising 

taxes on job creators, how is that going to help grow jobs and improve the employment situation that we all want to improve? 

Mr. STONE. The specific—the spending cuts that I talked about 

were spending cuts—— 

Mr. JORDAN. No, but you talked about spending cuts in the same 

breath you talked about with Mr. Cartwright, you talked about a 

balanced approach, and you just told me in a balanced approach, 

you preferred tax increases, and you preferred raising taxes on everybody when this so-called fiscal cliff debate we just had instead 

of just top margin you supported all of the marginal brackets going 

up. 

Mr. STONE. No, no, no. I didn’t—I said that the top, the marginal rates on incomes above $250- and $125- not—— 

Mr. JORDAN. Okay, my question is, do you support further marginal tax increases? You won’t answer that one. And I’m wondering 

how if you think contracting, you know, by not spending somehow 

we are going to hurt the economy and yet when you take money 

out of the economy by raising taxes on small business owners, how 

that is going to help promote jobs and increase employment. I can’t 

get the contradiction here. 

Mr. STONE. First of all, we have—almost all of the deficit reduction that we have done so far has been on the spending side. There 

has been about $1.5 trillion. 

Mr. JORDAN. Doctor, how can you say we have done any deficit 

reduction? That is all in the outyears. We haven’t done anything. 

We are spending more in discretionary spending this year and certainly more overall spending this year than we spent last year, and 

last year we spent more than we spent the year before, and 2 years 

ago we spent more than we spent 3 years ago, and 3 years ago we 

spent more than we spent 4 years ago. So how have we cut spending? Do you not agree the government is bigger today than it was 

84 

4 years ago? We are spending like $3.6 trillion. In 2007, we were 

spending $2.8 trillion. Last time I checked—even as a Republican 

I can do that math—last time I checked that is a lot more. 

Mr. STONE. The measure we would look at would be spending as 

a share of GDP, relative to the size of the economy. It’s—you need 

a metric. You can’t just talk about dollars, and it’s true—— 

Mr. JORDAN. That is huge spending. The economy has been contracting for the last 4 or 5 years, just finally started to grow at that 

wonderful rate of 1.5 percent after all this spending we have done, 

that further confirms. So spending as a percentage of GDP is way 

up because GDP has been down. That is what is killing our economy overall. 

Mr. STONE. A large amount of the spending that has gone up in 

the past few years has been spending that has to do with emergency, with temporary spending, temporary programs. The budget 

caps that are in place—— 

Mr. JORDAN. The very temporary programs that we are talking 

about today that have been a disincentive to work, exactly. 

Mr. STONE. Well, I don’t agree that they have been a major disincentive to work. But I agree that they have been an important— 

my view is that they have been an important contributor to keeping the recession from being worse than it was. 

Mr. JORDAN. Well, it is tough to prove a negative. What we can 

prove is we are spending a lot more today than we were 4 years 

ago. That’s obvious. That’s a simple subtraction, mathematics addition problem. 

Mr. STONE. And over the past couple of years, spending as a 

share of GDP is going down. And the spending that I was talking 

about was, in my testimony, was spending on goods and services 

by Federal, State, and local governments, which has been very 

contractionary. We had some support for State and local governments in the Recovery Act, but we stopped doing that. And the 

budget constraints that State and local governments have faced 

has forced them to be very austere. Huge numbers of jobs have 

been shed, and the output, and now purchase of goods and services 

from State and local governments is way down. 

Mr. JORDAN. Let me do one other thing before turning to the 

ranking member for a second round. 

Dr. Mulligan, let me ask you, the big thing that’s coming starting 

to impact right now and employers are starting to look at, is the 

Affordable Care Act—some Obamacare, Affordable Care Act. CBO 

estimates that this piece of legislation will lead to 800,000 fewer 

Americans working in the economy by the end of this decade. Do 

you agree that this is going to be an impediment to job creation, 

going to cause a loss of jobs, and if so, would you agree with CBO? 

Do you think they are right, they are wrong, that they got it, or 

missed it, or what? 

Mr. MULLIGAN. Well, CBO, I have seen that 800,000 number. I 

have seen something else they put out, too, very earlier. I was impressed by this. They did some work on marginal tax rates from 

the sliding-scale aspect of the exchange subsidies, and they talked 

about marginal tax rates in the neighborhood of 25 percent. That 

would be one of the biggest squares in my chart. It is not there yet. 

But when they did their 800,000—it is not the way I would have 

85 

done it—when they did their 800,000 they ignored that 25 percent 

disincentive. They have not calculated. I have been working with 

them and they have not calculated how many millions of people 

will have tax rates over 100 percent under Obamacare. Maybe that 

is something they will do, but they haven’t factored that in yet. So 

I’m pretty sure when you factor that in you are going to have to 

say there is going to be more than 800,000 jobs lost. I wish I could 

bring you numbers today. It should be a lot more. How many more, 

how many millions, I can’t tell you right now. 

Mr. JORDAN. Can you hazard a guess? 

Mr. MULLIGAN. I think it would be on the order of what the Recovery Act did. I mean, the exchange subsidies are kind of like that 

COBRA subsidy in my graph, but on steroids. So I kind of think 

of it on the order of the Recovery Act, which means multiple points 

on the unemployment rate, or nonemployment rate. I’m not sure 

whether these people will go into unemployment or out of the labor 

force, but something like that. 

Mr. JORDAN. Really quick, before turning to Mr. Cartwright. 

Doctor, your thoughts on the CBO assessment that 800,000 fewer 

people are going to work as a result of the Affordable Care Act. 

Mr. STEUERLE. Well, I think it raises an issue of two groups of 

the population we haven’t really focused much on in this hearing. 

The first one is the elderly. I think one of the reasons that CBO 

came up with this number, I may be wrong, but I think one reason 

they came up with this number, is now those people who want to 

retire early, they do have access to health insurance. And so this 

may be a major group upon whom this has an impact. And I don’t 

know that it is necessarily a combined marginal tax rate, it just 

may mean at that point with some matched amount of 401(k), with 

health insurance, they can make it to 62 or something and retire 

for a few more years. I remind you, the average couple now gets 

benefits that retire at 62 for about 27 years, for younger people 

going towards 30. But there’s another group that we haven’t talked 

about which is on the other end of the spectrum that doesn’t really 

have access to almost any of these welfare programs and that is 

the young. And I gave statistics in my testimony also about what’s 

going on with the labor force among the young and younger workers, and that is not an issue of the social welfare programs, in 

many cases particularly young men, especially some young women, 

especially those who don’t have children, don’t really have access 

to almost anything in the social welfare system. I think our systems do a pretty bad job in terms of dealing with their needs for 

the right type of training and the right type of job opportunity if 

they are not going to college. I think the whole program of apprenticeships needs to be examined. And so I hope this committee, beyond just this issue of combined tax rates and everything else will 

start to look at also what is happening in employment patterns 

among the young. I don’t have an answer there, but I think that’s 

an issue worthy of consideration, and I say it goes beyond just 

what social welfare programs we have, because in many cases, they 

don’t have access to them that help in any way. 

Mr. JORDAN. Great, thank you. The gentleman from Pennsylvania. 

86 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. And Ms. Carter, we 

certainly don’t mean to ignore you, and I wanted to ask you a question. What is the name of your company? 

Ms. CARTER. Carter Machine Company. 

Mr. CARTWRIGHT. And okay. What is the town that it is in? 

Ms. CARTER. Galion, Ohio. 

Mr. CARTWRIGHT. Galion, okay. And is it your testimony that you 

have up to 20 jobs available there right now? 

Ms. CARTER. We could, yes. 

Mr. CARTWRIGHT. So if I called up your company, they would say 

they are hiring right now? 

Ms. CARTER. Yes. 

Mr. CARTWRIGHT. Okay. All right. And now, Dr. Stone, I want to 

follow up with you, and I promise not to interrupt you. Why is it 

important to talk about spending as a percentage of GDP? 

Mr. STONE. Well, because it is a measure of how much we are 

spending relative to our capacity to engage in all kinds of things; 

that it makes no sense to talk about 1950, how many dollars we 

were spending on something in 1952, compared with how many 

dollars we are spending on it in 2013. Because there has been so 

much price change in between. 

Mr. CARTWRIGHT. Okay. 

Mr. STONE. It is not just a matter of real. And the economy has 

been growing, so we can support a certain level of spending in a 

bigger economy than we can in a smaller economy. 

Mr. CARTWRIGHT. Okay, so that’s why it makes no sense to talk 

about us spending more dollars today than we did last year, okay. 

Now, I also wanted to touch on something called automatic stabilizers. A key tool, I think you have been touching on, used to ease 

the consequences of negative economic shocks in response to a 

downturn in the economy, automatic stabilizers such as unemployment compensation or even food stamp benefits automatically increase as jobs are eliminated and more people become eligible for 

the benefits. 

These benefits provide critical income support, obviously, to unemployed individuals and they also ease financial burdens while 

the recipients seek permanent employment. 

Dr. Stone, do you agree that unemployment compensation and 

food stamp benefits are effective forms of support to the individuals 

and families struggling during economic crises? 

Mr. STONE. They are very effective and they are very supportive 

of the economy. That is the automatic stabilizing role, is that they 

keep spending at a higher level than it would be if these people 

were left on their own. 

Mr. CARTWRIGHT. So do you agree then that businesses and employees of businesses at which food stamps and unemployment recipients spend their money are positively impacted by those programs as well? 

Mr. STONE. That’s right. In a weak economy, that’s extra demand. If we were back in the 1999 economy, when the unemployment rate was closing in on 4 percent, there would be questions 

about spending here or crowding out spending there, but that 

makes no sense in today’s environment when there’s so many idle 

resources. 

87 

Mr. CARTWRIGHT. Well, the fact of the matter is, if you don’t have 

a job, you don’t have income, you don’t really have the option to 

put money in the bank, generally speaking, beneficiaries of these 

programs spend their unemployment or food stamp benefits just as 

quickly as they receive them, causing a boost in demand, nationally, for goods and services in the economy. 

Dr. Stone, is that correct? 

Mr. STONE. That’s right. The Congressional Budget Office finds 

that to be the highest bang for the buck programs in—of the ones 

they look at in a weak economy like we have been experiencing. 

Mr. CARTWRIGHT. And you mention the Congressional Budget Office. Is that a partisan outfit? 

Mr. STONE. No. 

Mr. CARTWRIGHT. Okay. 

Mr. STONE. They have had Republican and Democratic directors. 

They work for the Congress, the whole Congress. 

Mr. CARTWRIGHT. Now, Dr. Stone, a recent study by Wayne 

Vroman examined the stabilizing role of unemployment compensation during the ’07, ’09 recession. He found that the unemployment 

compensation, it closed 18.3 percent of the GDP shortfall that was 

caused by the recession. He also found that extension of benefits 

played an important role in that stabilization effect. We can’t ignore the positive effect of those benefits, nor can we ignore the 

harm it would cause to the unemployed during an economic downturn if these benefits were not there to respond. 

Now, Dr. Stone, isn’t it also important to note that the increased 

budgetary cost associated with the expansion of these programs is 

temporary and projected to decline as a share of the GDP? 

Mr. STONE. Yeah, and decline in dollar terms, too. The number 

of unemployed will fall as the economy improves, and Congress has 

always let emergency unemployment programs expire once the 

economy is strong enough. They have just never done it any time 

in the past when the unemployment rate was higher than 7.2 percent and we are not expected to get below that in CBO’s projections 

until sometime in 2014. 

Mr. CARTWRIGHT. Well, thank you, Dr. Stone. I appreciate your 

comments. 

Mr. JORDAN. Real quick. Dr. Stone, if food stamps and unemployment insurance increase demand and are stimulative in the economy, why then should we—why shouldn’t we just increase them 

even more? Why not—I mean, I don’t—I just fail to grasp this logic 

that says, oh, these are the best stimulus programs we can do in 

a difficult economy. Well, if that is the case, we should be pumping 

a lot more money into these programs. 

Mr. STONE. They have high bang for the buck. There are obviously political constraints on how high you would want to push 

those things. 

Mr. JORDAN. Do you think there should be an asset test required 

before an individual can receive food stamps? Do you agree with 

the fact—well, let me ask you this way. Do you agree that waiving 

the asset test for food stamps is a good thing? 

Mr. STONE. I don’t have a—I’m not an expert on food stamps. 

Mr. JORDAN. Well, I mean, right now there is an income—there 

is an income requirement, that’s it. You don’t have income, you get 

88 

food stamps. There used to be an asset test. In other words, today, 

in some places you can have, you know, three brand-new cars sitting in the garage but you don’t have an income, you are eligible 

for food stamps. Do you think that is appropriate? 

Mr. STONE. In many of our programs where we have asset tests, 

they have not been—— 

Mr. JORDAN. This is why the lady in Michigan who won the lottery could still get food stamps. She doesn’t have an income, but 

she just, you know, she landed a little bit of cash there all of a sudden, yet she can still get food stamps. Do you think that is right? 

Mr. STONE. There are particular examples. 

Mr. JORDAN. There used to be an asset test. There is no longer 

an asset test. In some situations do you think that is appropriate? 

Simple question. 

Mr. STONE. There are problems with asset tests, and there are 

problems when you get rid of asset tests. It is a trade-off, a balance. 

Mr. JORDAN. Do you think there should be a work requirement— 

no, let me ask it the other way. Do you think it is appropriate for 

this administration to waive the work requirement for able-bodied 

adults receiving some type of social services, some type of welfare 

recipient? 

Mr. STONE. In a situation where it’s—in an economy like—— 

Mr. JORDAN. The law has been around for 16 years, signed by 

President Clinton, bipartisan support. 

Mr. STONE. Yes, President Clinton, whose—— 

Mr. JORDAN. Do you think there should be a work requirement? 

Mr. STONE. Waiving it at a time when jobs are hard to find 

makes perfect sense to me. 

Mr. JORDAN. Let me ask you, Dr. Steuerle. Do you think a work 

requirement would help with this phenomena you describe in your 

testimony where people who are unemployed for a significant period of time, it is not good for that individual, not good for that 

family. Miss Carter is talking about how it is not good for the community, good for her county. Do you think it would be helpful if 

there was a work requirement that may help them retain some of 

those skills as they are trying to find that employment that we all 

know everyone wants to find? Do you think that would be helpful? 

Mr. STEUERLE. I think it would be helpful to try to move in that 

direction. I think work requirements are very hard to implement. 

That is one reasons, for instance, through devices like earned income credit, it effectively has a work requirement because you don’t 

start getting the benefit until you at least do some work, even 

though I recognize—I’m sorry, even though I recognize that at 

some income level—— 

Mr. JORDAN. I understand they are hard to do. I mean, lots of— 

you know, lots of things that are worth doing are hard to do. That 

is just the way life is. Any goal that is worth achieving is never 

easy. That’s life. But my question to you is, do you think it helps 

if we have that, helps those very individuals you talked about in 

your testimony? 

Mr. STEUERLE. I would move in that direction, but one way I 

would do that is probably trying to provide more money in work 

supports and less money in consumption-related programs. 

89 

Mr. JORDAN. Fine, but there is a work requirement. That is now 

being waived in all places across the country. 

Dr. Mulligan, do you think unemployment compensation and food 

stamps are actually stimulative to our economy? 

Mr. MULLIGAN. No, they are not stimulative. I think—there’s a 

couple of mistakes I think made here. It was said that the CBO 

showed, and the CBO found, and Mr. Vroman showed that UI and 

food stamps are stimulative. They didn’t. They assumed. The CBO 

assumes—— 

Mr. JORDAN. Oh, so there’s—there’s no empirical, there’s no real 

research that confirms what Dr. Stone described? 

Mr. MULLIGAN. Right, but there is research on—first let me say, 

there is research in a couple of areas related to this. Number one, 

research shows pretty clearly that the poor and unemployed tend 

to quickly spend what they have on basic needs. Mr. Cartwright 

mentioned that. That’s true. They quickly spend—— 

Mr. JORDAN. Yeah, that’s common sense. We all understand that. 

Mr. MULLIGAN. That’s why the programs have intrinsic value, 

but that is different than stimulative value. You have to recognize 

that some of them, not all—Mrs. Duckworth, I think, didn’t characterize it right. It is not true about all, but some are going to work 

less. And working less is a ticket to spending less. They kind of go 

together. Unless you are in the 100 percent tax situation, they go 

together. So it actually leads to less aggregate spending. I think 

what gets forgotten is these programs have to be funded. Somebody’s got to buy the government bonds, or pay the taxes, or maybe 

it’s some other program that gets shrunk, and those people are 

going to spend less, and you have to count that, too. 

Mr. JORDAN. Yeah, opportunity costing—— 

Mr. MULLIGAN. So the aggregate spending declines, and the 

thing that CBO, that—the way they make their assumption is, 

they look at studies of purchases. Dr. Stone mentioned government 

purchases, but you weren’t asking me about purchases. You were 

asking me about transfers. Transfers are very different. Purchases 

means you pay a guy to work. You pay a guy to build a highway. 

You pay a guy to help build a military airplane. Transfers mean 

you pay a guy for not working, and really they are kind of the opposite. But CBO and some other economists have picked up on the 

purchases study and said, hey, purchases expanded the economy; 

therefore, transfers must expand the economy, and that last piece 

of the logic is backwards. 

Mr. JORDAN. Yeah, well said. 

I want to thank you all for being here today. We have had a 

great hearing. Your testimony was very much appreciated. Sorry 

we had to have a break in there, but that is the way this place 

works. There’s votes called at certain times, and when it is time 

to vote, we have to do that. So this committee is going to continue 

to look at this issue, and again we appreciate your time and we 

stand adjourned. 

Thank you. 

[Whereupon, at 4:10 p.m., the subcommittee was adjourned.] 

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