Despite Barack Obama’s blather to the contrary, government payments to the unemployed are not “insurance.”
Real insurance is a financial instrument voluntarily sold and purchased on a free market for the purpose of spreading risks, with the benefits defined by contract. For example, we know that some people’s houses will burn down, but we don’t know whose; therefore, most of us who own houses purchase home insurance that covers (among other things) destruction by fire.
Although government unemployment welfare has substantially throttled the need for and value of private insurance, some private insurance is still available. For example, people can purchase unemployment insurance to supplement government payments; consumers may purchase credit insurance to cover payments on debts during times of unemployment; and people may purchase private disability insurance to cover unemployment (my wife has this sort of insurance). Some people choose to protect themselves from the costs of unemployment simply by saving money ahead of time. In a market free from government force, insurance companies and other businesses would offer many additional options.
Government payments to the unemployed are not insurance. The so-called customers do not willingly pay for it; rather, government takes the money by force. Most government unemployment funds are confiscated from business owners—a violation of their rights (which makes it harder for business owners to hire people or increase wages).
As the Library of Economics and Liberty points out, “The federal government makes grants to the states for the administration of the unemployment insurance program.” CBS reports that Obama’s new plan carries a “$6.5 billion price tag.” Where does this money come from? Again, government forcibly takes it from producers, in violation of their rights.
As Obama’s push to expand government unemployment payments makes clear, such payments are not defined by contract, as are the benefits of real insurance. In the case of government unemployment payments, there is no contract. There is a gun and a governmental decree.
Obama is right about one thing: Many people who are now unemployed lost their jobs through no fault of their own. What Obama will not admit is that they lost their jobs mostly because of the reckless and rights-violating policies of the Federal Reserve and of profligate politicians, whose policies fundamentally caused the mortgage meltdown.
Although the elementary-school lesson appears to be lost on most of today’s politicians, two wrongs do not make a right. The fact that government caused high unemployment by violating people’s rights does not mean government should pay the unemployed by further violating people’s rights.
Rather, Americans should demand that government get out of the “business” of violating people’s rights, so that people can produce and contract freely—as their lives and prosperity require.
- Review: The Financial Crisis and the Free Market Cure, by John Allison
- Obama, Unsurprisingly, Gets Ayn Rand Wrong
Image: Austen Hufford