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Unemployment benefits extension clears hurdle

NolaMan said:
Alright.

1) Unemployment benefits do not really help the economy. This point also really goes with, "Yes, but government generated demand is a false demand. It first has to kill a same level of private sector demand. There are no jobs (I would argue) because the government keeps spending untold amounts of money trying to "create" them, ignoring that it first elimintes them by taking that money out of the private sector."

My point here is basically that an extension will really do nothing to help us move from where we are. This is basically an extension of the broken window fallacy (defined here).

The point is that diverting money from one group to another does not really create "new" economic activity, it simply relocates what was already there to begin with, essentially destroying the economic activity that was there to start. This is an ecomonic theory certainly, as there are others that oppose this viewpoint, it appears we come down on opposite sides of that theory.
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That is not what is happening. We are borrowing money from other countries, not taking it from other people in this country. Eventually it will have to be handled, but economic growth will limit the impact in hopefully fairly short order. The Broken Window fallacy does not work because it is not a relatively closed community.



2) Paying people not to work (in the name of economic recovery) is going to get us nowhere

Many prominent economists have admitted that paying people not to work takes away their incentive to find work. Alan Krueger, the current Assistant Secretary of the Treasury for Economic Policy, and Lawrence Summers, current director of the White House's National Economic Council both have made comments to this regard. Even Paul Krugman states, "Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits are likely to be slightly more choosy about accepting new jobs." While he goes on to argue that "slightly" is key, he does admit that it makes them more choosy.

Additionally, from the OECD Employment Outlook of 2007 (Page 75 roughly), it is argued, "It is well established that generous unemployment benefits can increase the duration of unemployment spells and the overall level of unemployment…"

Additionally, A Federal Reserve Bank of San Francisco study argued basically that tax cut multipliers beat government spending multipliers in terms of GDP growth. That also goes to the point of unemployment benefits just won't work to bring us out of the where we are. (The first point)
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No one is saying that there is not a negative effect to unemployment, but I do not see any evidence that in fact it is anything but small. When official unemployment is running 10 %, and much higher in areas, and U6 closing in on 20 %, this shows a strong lack of available jobs.
 
Dav said:
A few things. For one thing, I'm not really sure what the point of that link was when my whole point was that high unemployment does not indicate a lack of jobs; saying that yes it does, because there's high unemployment, is a weird argument.

Now, another link: Gallup Daily: U.S. Job Market

Right now, there are more companies gaining jobs than losing them - according to Gallup, 29% of businesses are growing, whereas 21% are letting people go. Keep in mind that the 44% that are "not changing in size" are almost certainly hiring new people, as they replace people who both leave voluntarily and who retire, or who get laid of for non-economic reasons. Also look at data for the last two years - for the whole time the economy has been in the toilet, companies "not changing" in size have far outnumbered both "hiring" and "letting go", both of which have stayed more or less equal to each other.

So yes, there are jobs available. I in fact know several people who have gotten at least halfway-decent jobs within the last year. Granted, the economy around here isn't nearly as bad as in Michigan, but the recession has had an effect nonetheless. Still, lots of people are hiring.

Anyways, if someone really can't find a job in two years, I don't know how an extra six months is supposed to help/encourage them.
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Dav, remember that just to keep up with increaded demand for jobs, the economy has to generate a certain number of positive jobs. 100k a month or so IIRC, which means that yes, there can be more people in the workforce, and still be higher unemployment(however you want to figure it)
 
The differences between the Democrats and the Republicans could not be more stark: support for extending benefits to unemployed workers during the worst economic conditions since the 1930s versus support for extending hundreds of billions of dollars in tax breaks to the wealthiest among us. Yes, let's campaign on that.
 
It gives them a safety net. It buys them time, so they will still be alive and on the grid when things get turned around.

Dav said:
Anyways, if someone really can't find a job in two years, I don't know how an extra six months is supposed to help/encourage them.
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NolaMan said:
Additionally, from the OECD Employment Outlook of 2007 (Page 75 roughly), it is argued, "It is well established that generous unemployment benefits can increase the duration of unemployment spells and the overall level of unemployment…"
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Obviously unemployment benefits can effect structural unemployment. The fact is we are 3-4% higher than the natural rate of unemployment. Unemployment benefits increase consumption, which in turn increases income. Therefore they are effective at reducing the output gap and returning us to full employment (ie the natural rate).

Additionally, A Federal Reserve Bank of San Francisco study argued basically that tax cut multipliers beat government spending multipliers in terms of GDP growth. That also goes to the point of unemployment benefits just won't work to bring us out of the where we are. (The first point)
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This is mathematically impossible.

A tax or transfer payment has a multiplier effect of

MPC x 1/(1-MPC)

whereas government spending will have a multiplier of:

1/(1-MPC)

Government spending does not go through a round of saving before it is initally spent (and therefore increase income).

However, in another thread I stated that unemployment benefits are paid to people who have a higher MPC, which would mean that they have a larger multiplier effect than other similar policies (ie an across the board tax cut).
 
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Redress said:
That is not what is happening. We are borrowing money from other countries, not taking it from other people in this country. Eventually it will have to be handled, but economic growth will limit the impact in hopefully fairly short order. The Broken Window fallacy does not work because it is not a relatively closed community.
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The world economy is a closed community. Borrowing money from other countries makes no difference. These nations must acquire American dollars before they can lend them back to Washington. Foreign countries can acquire American dollars by either:

1)Attracting American investments in their country. In that instance, the dollars leaving America match the dollars lent back to America. The net flow of saving circulating through the U.S. economy does not increase.
2) Selling goods and services to Americans and receiving American dollars in return. For the United States, these imports raise the trade deficit and thus reduce domestic demand. The government's subsequent borrowing back and spending of these dollars merely offsets the increased trade deficit.

In either situation, American dollars must first leave the country before they can be lent back into the U.S. economy. The balance of payments between America and other nations must net zero. Consequently, government spending funded from foreign borrowing does not provide stimulus.
 
NolaMan said:
Many prominent economists have admitted that paying people not to work takes away their incentive to find work. Alan Krueger, the current Assistant Secretary of the Treasury for Economic Policy, and Lawrence Summers, current director of the White House's National Economic Council both have made comments to this regard. Even Paul Krugman states, "Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits are likely to be slightly more choosy about accepting new jobs." While he goes on to argue that "slightly" is key, he does admit that it makes them more choosy.
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Underemployment has significant effects upon the economy. Hence why the BLS reports the U6 number. You are going to have to explain why making workers more choosey is a bad thing.
 
drz-400 said:
Obviously unemployment benefits can effect structural unemployment. The fact is we are 3-4% higher than the natural rate of unemployment. Unemployment benefits increase consumption, which in turn increases income. Therefore they are effective at reducing the output gap and returning us to full employment (ie the natural rate).



This is mathematically impossible.

A tax or transfer payment has a multiplier effect of

MPC x 1/(1-MPC)

whereas government spending will have a multiplier of:

1/(1-MPC)

Government spending does not go through a round of saving before it is initally spent (and therefore increase income).

However, in another thread I stated that unemployment benefits are paid to people who have a higher MPC, which would mean that they have a larger multiplier effect than other similar policies (ie an across the board tax cut).
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I am not an economist, but it seems to be grounded in a rational argument for the Federal Reserve Bank of San Francisco to make it, does it not? At the very least, I would argue the multipliers would be the same, but again, not an economist.
 
drz-400 said:
Underemployment has significant effects upon the economy. Hence why the BLS reports the U6 number. You are going to have to explain why making workers more choosey is a bad thing.
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It cannot go both ways. If the argument is we need to extend benefits because people cannot find a job, then perhaps the problem is they are being to choosy? If the argument, which you seem to indicate it should be, is that we need to extend benefits so people can find the job they want, then I think that is a political lost cause and certainly not a responsibility of the government.
 
Chappy said:
The differences between the Democrats and the Republicans could not be more stark: support for extending benefits to unemployed workers during the worst economic conditions since the 1930s versus support for extending hundreds of billions of dollars in tax breaks to the wealthiest among us. Yes, let's campaign on that.
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dems seem to think that handouts are the same as tax breaks to those who already pay too much in taxes and if allowed to keep more of their OWN money might actually spend it which creates JOBS

keeping people sucking on the public teat and dependent on their dem masters might win your overlords elections but it sure buggers up the USA in the long run
 
NolaMan said:
The world economy is a closed community. Borrowing money from other countries makes no difference. These nations must acquire American dollars before they can lend them back to Washington. Foreign countries can acquire American dollars by either:

1)Attracting American investments in their country. In that instance, the dollars leaving America match the dollars lent back to America. The net flow of saving circulating through the U.S. economy does not increase.
2) Selling goods and services to Americans and receiving American dollars in return. For the United States, these imports raise the trade deficit and thus reduce domestic demand. The government's subsequent borrowing back and spending of these dollars merely offsets the increased trade deficit.

In either situation, American dollars must first leave the country before they can be lent back into the U.S. economy. The balance of payments between America and other nations must net zero. Consequently, government spending funded from foreign borrowing does not provide stimulus.
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This goes against your argument of crowding out though. If the US sells treasuries to a foriegn country, this increases the demand for US dollars, which would increase the exchange rate. An increase in the exchange rate would cause the current account to fall (more imports less exports) and the capital account to rise (capital inflows).

The savings rate is:

S = Ps + Gs + Cap.

Ps is private saving, Gs is government saving (- if a deficit), and Cap is capital inflows (which would increase it the US sells assets to foriegners).
 
drz-400 said:
This goes against your argument of crowding out though. If the US sells treasuries to a foriegn country, this increases the demand for US dollars, which would increase the exchange rate. An increase in the exchange rate would cause the current account to fall (more imports less exports) and the capital account to rise (capital inflows).

The savings rate is:

S = Ps + Gs + Cap.

Ps is private saving, Gs is government saving (- if a deficit), and Cap is capital inflows (which would increase it the US sells assets to foriegners).
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But the point is those dollars have to come from somewhere to buy US treasuries right? For foreign countries to obtain US dollars, it is basically the same scenario as dollars leaving the country, just to come back in, resulting in no net gain... right?
 
Chappy said:
The differences between the Democrats and the Republicans could not be more stark: support for extending benefits to unemployed workers during the worst economic conditions since the 1930s versus support for extending hundreds of billions of dollars in tax breaks to the wealthiest among us. Yes, let's campaign on that.
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The GOP is not against unemployment benefits they are against increasing the debt. If the dems would abide by their pay go law the GOP would support it
 
NolaMan said:
It cannot go both ways. If the argument is we need to extend benefits because people cannot find a job, then perhaps the problem is they are being to choosy? If the argument, which you seem to indicate it should be, is that we need to extend benefits so people can find the job they want, then I think that is a political lost cause and certainly not a responsibility of the government.
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To me they go hand in hand. If people get a job, it would be best if they get the one they are good at, especially if they were seperated from their previous job due to the business cycle.
 
So ... why did they vote FOR it under President Bush, but against it under President Obama?

ptif219 said:
The GOP is not against unemployment benefits they are against increasing the debt. If the dems would abide by their pay go law the GOP would support it
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NolaMan said:
But the point is those dollars have to come from somewhere to buy US treasuries right? For foreign countries to obtain US dollars, it is basically the same scenario as dollars leaving the country, just to come back in, resulting in no net gain... right?
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Not everything in the economy is static. You cannot simply hold one side of the equation constant and change around variables. There are gains from trade.
 
BDBoop said:
So ... why did they vote FOR it under President Bush, but against it under President Obama?
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The debt was much less then. Why won't the dems abide by the pay go law they passed? The GOP said use tarp funds why are the dems against that?
 
BDBoop said:
So ... why did they vote FOR it under President Bush, but against it under President Obama?
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why did dems whine about Bush's reckless spending with a GOP congress in 2005 but they support Obama's far more reckless spending with a dem congress in 2009?
 
Well dispite all the extreme right wing libertarians the legislaiton passed .. good for the people. For a while there I thought the nazi bastards would stop it.
 
Gabriel said:
Well dispite all the extreme right wing libertarians the legislaiton passed .. good for the people. For a while there I thought the nazi bastards would stop it.
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They did not want to stop it. They wanted it paid for so it would increase the debt. Why will the dems not abide by the pay go law they passed?
 
Redress said:
They expanded on the data available. They included asking people if they are actively looking for work instead of guessing. They made the U1 - U7 scale somewhat standard. Did you read the whole thing?
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Did you read the entire thing because it shows the government cooking the books on the U-6 table. They do no count all of the people because it states on page 8 for the U-6 table, "the number of persons seeking full time jobs, plus one-half the number of persons seeking part-time jobs, plus one-half the number of persons employed part time for economic reasons, as a percent of the civilian labor force less one-half of the part-time labor force." It must be nice to only count one-half of the people for three of the four categories listed.
 
Aha. You don't have an answer. I see.

TurtleDude said:
why did dems whine about Bush's reckless spending with a GOP congress in 2005 but they support Obama's far more reckless spending with a dem congress in 2009?
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The_Patriot said:
Did you read the entire thing because it shows the government cooking the books on the U-6 table. They do no count all of the people because it states on page 8 for the U-6 table, "the number of persons seeking full time jobs, plus one-half the number of persons seeking part-time jobs, plus one-half the number of persons employed part time for economic reasons, as a percent of the civilian labor force less one-half of the part-time labor force." It must be nice to only count one-half of the people for three of the four categories listed.
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Can you guess why? By the way, can you guess how they figure U7 unemployment? Oh, and is U6 unemployment the official unemployment rate?
 
Redress said:
Can you guess why? By the way, can you guess how they figure U7 unemployment? Oh, and is U6 unemployment the official unemployment rate?
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It's the one you cited. I don't care why the government lies and cooks the books. I only care that it does. By using the real calculation for unemployment the rate goes up to 20-25% which is what I've said and used data to support this. You chose to disregard it and you choose to disregard the federal government admitting to cooking the books. Have a wonderful evening.
 
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