Entitlement Spending Correlates with Unemployment – Policy Options Overview

Though Entitlements Are Structural, Not a Cyclical Problem, Entitlement Outlays Go Up with High Unemployment Real Entitlement Spending Y/Y Growth & Unemployment Rates, 1962 - 2009 Bp EET me = mm mem me = me mm mt = i = = 6 —— Real Entitlement Spending Y/Y wo “ —— Unemployment Rate = BY wes - eee ces ce eo ome cof oss cegI ceo posts mec com mest — mum tes GS REM! — mR RS Gem BT mR ee ae hale E ~ ~ 2 x S 1g ~~ - @ \ > 1 8 ! = 8% oN ’ D 4 £ ? = £ 0% . T T T T T T T T Fe T T T 1 ” 5 £ 86% Correlation Between 1986 & 2009 a < Lu rs] wo GIG wm — me me = me ce = kt 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 Note: Real spending adjusted for inflation. Fiscal year ends in September. Source: White House Office of Management & K P Budget, Bureau of Labor Statistics. www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 385 Increase Employment — High-Level Policy Options to Consider Short-run options: 1) Payroll tax holiday and/or 2) Employment tax credit and/or 3) Job training and/or ) 4) Restore labor mobility by reducing housing imbalances Medium- to long-run options: 1) Reduce employer health care costs and/or 2) Improve vocational training/education and/or 3) Encourage inward foreign direct investment, “onshoring” which would increase domestic employment KP Source: Richard Berner, “Employment Prospects and Policies to Improve Them’ (2/26/10), Morgan Stanley Research. (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 386 HOUSE_OVERSIGHT_021034