Feb 16, 2009
We harp. We know we harp. We can’t help it. Some people just don’t get it.

This morning (Feb 13), New Hampshire’s Democratic governor, John Lynch, announced 300 layoffs of state employees. What are the likely consequences of these layoffs? Presumably there will be longer lines at the Department of Motor Vehicles, and other government services will deterioriate. For the unlucky 300, the consequences will be a good deal more dire. Most people live from paycheck to paycheck. When that spigot abrubtly turns off, they will immediately dip into your pocket and mine to claim unemployment compensation.

In New Hampshire, benefits range from $32 to $427 a week for up to 26 weeks.¹ For those earning from $2,800 to $41,500 a year, that benefit will be slightly more than half their gross pay. For those earning more, it will be less.

The stresses these people will suffer will be many and varied. Some will not be able to keep up with their mortgages and will be tossed out of their homes (sound familiar?). The values of those houses, now white elephants owned by the bank, will drop through the floor. If the houses are on your block, your home value will decrease as well. If it decreases enough to make your home worth less than you owe on it, you may actually be well advised to abandon it, as at present you have no leverage (or government assistance) to renegotiate your mortgage.

Besides dipping into our pockets for cash benefits and decreasing the value of our prime asset, those 300 laid-off neighbors will cease enjoying the luxury of any discretionary spending, creating a ripple effect (or perhaps we should call it a non-ripple effect) across the immediate purview of their erstwhile economic landscape, increasing the downward slide of local restaurants, movie theatres, hardware and clothing stores, etc., etc. If the effect is great enough (and remember we are talking about 2.5 million of these hapless folks just over the past five months), then many of those establishments will close, further contributing to the downward momentum toward deflation and depression.

Since those who are pretty bad off to begin with (minorities, minimum-wage earners) are generally the first to get it in the neck during an economic downturn, some will become so desperate that they will be driven to extreme measures, becoming a physical threat to their neighbors and the general infrastructure. The court system will become clogged and jails will suffer further overcrowding, requiring yet more millions in public funds.

The Golden Rule—Do Unto Others As You Would Have Others Do Unto You—is not a touchy-feely, altruistic expression of noblesse oblige. It is a survival tactic. We are either in this together or we are in this alone. If we are in this together, we do everything we can to forestall layoffs, foreclosures, and closings, and that includes cutting back for a time on what we have in order to share the temporarily diminished pie. If we are in this alone, there is really only one thing we need to do.

Buy a gun.
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¹ Amount and Duration of [Unemployment Compensation] Benefits, accessed Feb 13, 2009
tags: Working Together | Employment | Governance