The 'Stimulus' for Unemployment

Discussion in 'Politics' started by KenH, Nov 18, 2009.

  1. KenH

    KenH
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    The 'Stimulus' for Unemployment

    by Alan Reynolds

    Why did the unemployment rate rise so rapidly — from 7.2 per cent in January to 10.2 percent in October? It was clearly the administration's "stimulus" bill — which in February provided $40 billion to greatly extend jobless benefits at no cost to the states.

    As Larry Summers, the president's top assistant for economic policy, noted in July, "the unemployment rate over the recession has risen about 1 to 1.5 percentage points more than would normally be attributable to the contraction in GDP." And the rate has moved nearly a percentage point higher since then, even though GDP increased. Countries with much deeper declines in GDP, such as Germany and Sweden, have unemployment rates far below ours.

    Summers knows why the US rate is so high. He explained it well in a 1995 paper co-authored with James Poterba of MIT: "Unemployment insurance lengthens unemployment spells."

    That is: When the government pays people 50 to 60 percent of their previous wage to stay home for a year or more, many of them do just that.

    ...

    Meyer and Lawrence Katz of Harvard estimated that "a one-week increase in potential benefit duration increases the average duration of the unemployment spells . . . by 0.16 to 0.20 weeks." Apply that formula to the 20-to-53-week extension we've seen, and you get an average of three to ten more weeks spent on unemployment. And, sure enough, the average unemployment spell has risen by seven weeks this year — to nearly 27 weeks by October.

    Katz also found that extended benefits, by making it easier for workers to wait and see whether they get their old jobs back, also makes it easier for employers to delay recalling laid-off workers. Just before unemployment benefits run out, Katz found "large positive jumps in both the recall rate and new job finding rate."

    The White House recently made the mysterious claim of having "saved" 640,329 jobs, at a cost of only $531,250 per job ($340 billion).

    In reality, the evidence is overwhelming that the February stimulus bill has added at least two percentage points to the unemployment rate. If Congress and the White House hadn't tried so hard to stimulate long-term unemployment, the US unemployment rate would now be about 8 percent and falling rather than more than 10 percent and — rising.

    - more at www.cato.org/pub_display.php?pub_id=10970
     
  2. donnA

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    we're living on unemployment right now, and I can not imagine there are people who like this hassel, but I am sure there are because we known people who no matter what did not want to work.
     
  3. Trotter

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    I would gladly trade unemployment for a job that paid as much or more. The only things available here are temp jobs (day or two here, day or two there, no benefits) and part time with very low hours... and you can't even get on with these.

    I can't believe how many scams have popped up about job offers lately. When things get bad it brings out the vulture in some people.
     
  4. Johnv

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    Larry Summers is in error. I can't imagine a single person on unemployment who would say no to a job if it were available. The unemployment rate is not because of unemployment insurance, it's because there are more workers than jobs available. Summers apparantly doesn't know the basic laws of economics.

    That said, the stimulus packages by both Obama and Bush did nothing but extend the length of the recession. That was a mistake.
     
  5. carpro

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    I can. Know several of them. Therefore, Summers is not completely in error. But you are, when you uncategorically say he is.

    That being said, I don't believe what Summers says applies to most of the people collecting unemployment. But there is no doubt at all that some people have that attitude, and don't get serious about finding a job until benefits are close to running out.

    Human nature is what it is.
     
    #5 carpro, Nov 19, 2009
    Last edited by a moderator: Nov 19, 2009
  6. donnA

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    I believe carpro is right, I've known people who will do anything not to have to work, and to them unemployment is heaven.
     
  7. windcatcher

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    First of all, I don't believe there is any unemployment which pays 50% of what one was making while employed........ unless that is true of those who had jobs at minimum wage or close to MW. ....... For those, I could almost say 'who could blame them?' if one considers that minimum wage is barely enough to live on. Considering that most any job requires transportation costs to and from, wardrobe in some cases to match meeting the public...... blue jeans and tee shirts don't cut it in many cashier, reception, clerking in retail........ where the jobs still are, sometimes additional commitments of money and time to retrain..... just for the hope of getting work. Yard work, construction, warehousing, and maintanance and housekeeping may use the more casual and stronger utility clothing, but even temps may be required to provide some specialty clothing and protective gear if a job is accepted. Better paying jobs are few, specialized and highly competitive and those who are likely to get offers, if unemployed, are most likely to be taking a pay cut from that which they were making before.

    While I do agree that provisions like the availability of unemployment pay, food stamps, etc. , may promote a delay in obtaining employment, particularly when the job offers aren't promising in permanency, benefits, maintaining skills, or pay...... yet, the truth remains..... it is the economy..... and the so called stimulus has done more to promote both tax increases, expansion of government and its programs, and the out-sourcing of industry(i.e. move to other countries) than doing nothing could have done.

    Here in Florida, the unemployment insurance tax charged to employers was about $8 per employee. FL's unemployment insurance went 'red' in August. Tonight on the news the annoucement was that employers will now be charged slightly more than $100 per employee. $100 seems reasonable enough if the economy was good and employers were not already in economic stress. But what should have been done in prosperous times to prevent deficits is too much too late to relieve the burden its additional making up may cause. Either way, it seems like a paltry sum considering the drain on the public coffers unemployment costs when employees are unemployed due to casual reasons which don't fit the guidelines of 'firing with cause'.

    We used to have a company, Vanity Fair, makers of fine lingere, but the people employed were paid by the piece work, so salaries varied, and, when quotas were met, the factory would go through cyclic 'seasonal' closings with their employees eligible for unemployment and whatever benefits might come with the drop in income until the plant reopened. I've heard of some types of employment by the school system as being treated as seasonal, enabling qualifying for unemployment during the summer for some people!

    When man trys to make solutions for the problems he creates in the making of his society and economy, we are dismal failures in reasoning out what is 'fair' and justified and what isn't. But, for certain, the stimulus hasn't done anything about keeping industry in this country and close to the people who consume the products and need the employment to make the wages which purchases the products and makes for demands.

    Environmental regulations is pushing the paper industry out of this area, which used to employ people in many areas from planting and growing the trees, to logging, transporting, industrial work and production, and shipping and marketing. Is anything being relaxed to encourage industry? To the contrary. The tighter things are already, the greater the scutiny, charges, expense of defense and steeper the fines..... if regulations are found to be broken. And, add to this, the additional ways government is adding to the tax burden of all employers and upon the energy used..... and possibly taxing benefits offered and failure to offer benefits, and the requirements to give paid (non-productive) leave for increasingly various reasons..... all which one could empathize with but some much less critical than others.... and many which could be managed as an inconvenience if people (employers and employees) were more responsible and flexible for better planning.

    No. Unemployment isn't growing because of unemployment benefits..... it is growing because people already out of work are not even getting interviews, or job offers or jobs. Eventually, many will lose heart and confidence that they can once again earn a decent living...... and these will drop from the roles and statistics of the unemployed as their benefits run out.... and, when they finally find new, and, more probably, mediocre jobs (if for no other reason than they were disspirited by their experience, and jobs using their skills have gone to younger, more energetic folks or moved out of country) the greatest loss will occur because their hopes and loyalties to a country and a government which they once believed was made up of them, has assisted the breaking of the spirit of which free enterprise once gave hope to all willing to work and own property..... They will see our government has stolen their hopes and ambition along with their wealth and prosperity and turned them into pawns in circumstances and a future they no longer have a voice in.

    I'm sorry if I seem depressingly honest or whatever others wish to judge me as being..... but, if government were to fold up all its programs of entitlement, even the SS on which I'm now dependant on, and only help the most desparate, I think, one way or another, we'd all figure out a way to work out our problems and get back on our feet.... if government would also withdraw its heavy hand of taxation and regulation which thwarts private (as opposed to consolidated, monopolistic) industry.

    Also, we do need a system of currency which is stable and under our governments control and not in the hands of foreign manipulation and foreign banks. If anything is to be clamped down on... it is the practice of creating fiat money on the books, and investments in speculation, derivatives, and hedge funds. Capital investment is what counts but the added 'tools' are barely more than lotteries: it uses the trusts and wealth of many innocent and unlearned people who work hard for their monies and manages these on the predictions of managers willing to speculate on winners and losers.... sometimes with sufficient influence and insider knowledge enough to manipulate for their own benefit while sticking to their innocent and trusting investors.
     
    #7 windcatcher, Nov 20, 2009
    Last edited by a moderator: Nov 20, 2009
  8. HankD

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    Huh? I received 20-25 percent of what I would normally earn when ever I collected.

    It was not "heaven" by any stretch of the imagination.


    I would also like to address something to which windcatcher alluded.

    If we consider ALL taxes (both obvious and hidden) we are paying the government until June each year.

    Imagine if you will all those taxes removed (For instance, gasoline tax is 54 cents per gallon here in WA State, some States are more CA = 64 cents). Our incomes would double in spending power.

    That much more to save, invest, give, etc... (and yes, to squander).

    Somehow our nation managed to survive and thrive without all these taxes in decades past.
    We have come full circle to "taxation without representation" (e.g. Cap and Trade, a tax on thin-air! Did you vote for it?).

    Let's start over and VOTE THE TAXMAN OUT!

    HankD
     
    #8 HankD, Nov 20, 2009
    Last edited: Nov 20, 2009
  9. donnA

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    It is for people who do not want to work. For them it's free money for doing nothing. I've seen it too many times. There are lazy men who do not want to work and will do anything to keep from it. I've so many take up with women who are single mothers or on social security to live off their welfare checks(plus food stamps) or social security checks, and it's even less the unemployment, and to them it was heaven, no work, with food and women. It happens a lot more frequently then you apparently even know. But this is the real world
    My husband currently gets unemployment for temporary lay off, and he gets more then 25%, it's actually more then 50%.
     

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