Commentary on a macro economics topic - Essay Example

This manifests the government’s efforts towards maintaining economic stability in case of unemployment. However, the article reckons that the federal government’s temporary “extended” and “emergency” unemployment compensation programs accrue benefits only after the state exhausts its benefits in case of a recession (Mulligan 1). This demonstrates the federal government’s concern on unemployment and depicts the government’s efforts towards economic challenges like recession. Notably, the federal unemployment insurance and any other temporary federal programs have expiration dates to discourage people from leaving their jobs, which would lead to increased unemployment levels.

In fact, the article notes that although the Unemployment benefits from any program have great importance to the unemployed, they equally depress the labor market by encouraging retrenchments and allowing people to remain unemployed (Mulligan 1). Nevertheless, where the victims are yet to get other jobs before the expiry date of such programs, the Congress extends the expiry date as part of the fiscal cliff deal (Mulligan 1). Indeed, the Affordable Care Act may replace the Emergency Unemployment Compensation if it expires on December.

The new program will be more beneficial since it will cover the unemployed and the premium subsidies for health insurance (Mulligan 1). This manifests the long-term concern by the federal government to address unemployment in the country. Moreover, the article presents the fact that the continued presence of the Emergency Unemployment Compensation and the new health care assistance derives an incentive for workers and employers to create and retain jobs (Mulligan 1). This is a long-term strategy to eliminate unemployment in the country.

The article advocates for employment since it leads to income that generates additional taxes and withheld benefits for the federal government (Mulligan 1). However, high tax rate discourages people from working. (Mulligan 1) The broken line depicts the level of the marginal tax rate if the Emergency Unemployment Compensation program expires on December 2013. The diagram shows that upon the expiry, the tax rates are bound to increase more at the beginning of next year. It also shows that the tax rates are bound to increase at a lower rate if the Emergency Unemployment Compensation program does not expire in December 2013.

Ideally, the health assistance will compensate the benefits lost from the expiry of the Emergency Unemployment Compensation program. The fiscal cliff as used in the article refers to a combination of expiring tax cuts and across-the-board government spending cuts effective Dec. 31, 2012 (“Investopedia” 1). Ideally, the fiscal cliff sought to avoid the adverse effects of expiring tax cuts and reducing the government spending at the same time. The fiscal cliff has an overall effect of reducing the federal budget deficit (“Investopedia” 1).

On the other hand, the marginal tax rate refers to the rate of tax paid to an additional dollar earned through employment (Reynolds 1). Notably, an increase in income leads to an increase in the marginal tax rate. As such, low-income earners accrue lower marginal tax rate that the higher income earners. Although, marginal tax rate seems like an equitable taxation strategy, many people