New Op-ed up at Fox News: Obama's Stimulus Package Will Increase Unemployment
My new Fox News piece starts this way:
A friend of mine from Madison, Wisconsin writes:
Wow, this spending will make us wealthier!
President Obama and the Democrats’ “stimulus” package will increase the unemployment rate. The changes they propose will also make us poorer, with fewer, less productive jobs.
The most obvious explanation is the $36 billion in increased unemployment insurance benefits. Larger benefits at least for this year will encourage some people, who may be unhappy with their jobs, to be unemployed while they look for something better. Others will be a little more reluctant to take a new job when they are offered it. Unlike the rest of the “stimulus” package that is over two years, since the increased benefits are only planned for this year, the higher payments will increase unemployment this year and then start declining soon after the extension ends.
Yet, the “stimulus” package will do something else that will increase unemployment at least as much. Most of the new jobs will be for people who are currently employed. By moving money from places where it is currently being spent to places where the government wants it spent, you move the jobs also. But it takes time for people to move between jobs – that is called unemployment. . . .
A friend of mine from Madison, Wisconsin writes:
Somewhat related to your op-ed below, the lead story in this past Sunday's (2/1/09) Milwaukee Journal-Sentinel started by pointing out that the House version of the stimulus bill gives the Milwaukee Public School (MPS) system $88 million dollars for construction of new schools at a time when MPS has fifteen vacant school buildings and has no plans [currently] for new school construction. . . .
Wow, this spending will make us wealthier!
Labels: Economy, op-ed, unemployment
posted by John Lott at 4:32 PM
53 Comments:
Much of this commentary is nothing more than fearful reasoning that may confuse the audience. For example. If one quits their job to find a better one they do not count on the unemployed roles, additionally the vacated position has the potential of hiring someone else to replace the job seeker- hence no loss in employment levels. The arguments against moving towards future technologies has similiarities to those made when we moved from horse to horseless carriages or from typewriters to word processors. Granted one could argue that "the market" was the driving force but government involvement was present in many of these transitions- ie the railroads and telegraph.
You are evil. Have you no compassion for the people who are hurting from this crisis? Something must be done and you are trying to score silly debating points.
Is this a valid concept
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Marked50 you would think that little clause on "only getting unemployment" if you are laid off. Well news flash. In times like these people will make arrangements with their employers to get laid off, or they will stop working period, so as to get fired. The employer doesn't mind as much seen that with extended unemployment benefits worker accept much smaller severance. Employers tend to lag in replacing laid off labor. And when the govt chooses you a one of the losers in the market by subsidizing other technologies that are not in as much demand, the take market share.
I am currently trying to get a former colleague to accept a job offer from our company. Extremely productive and capable individual but as he is cashing in on unemployment he seems in no hurry to accept. I am expecting him to accept the offer soon and put as starting date near the expiration of benefit.
I like to know where did you get the idea that govt was involved in the transitions you mentioned. The only thing the govt monopoly did was kill some of the companies that started some of these technologies.
So stop drinking cool aid and start reading about economics.
jrtoor, assuming what you describe about a company's severance motivation is true you appear to believe that that type behaviour of both people and company is endemic to these times. I doubt the prevalence unless you have data to support. It is always the exceptions that seems to drive these opinions, hence the fear mongering connection. It would be an error to base your business or even your political decisions exclusively on statistical exceptions.
Additionaly, you seem to be making assumptions about your friends motivations that may not be the whole picture and the job you hold for him must not be super critical if you can wait for his benefits to run out.
In regards to the technology shifts I suggest you may need your own economic training if not just history. Trains were facilitated by the massive government largesse of rights of way. Would our use of cars and trucks have been as ubiquitous if we didn't have government developed roads like the interstate system?
More Koolaid for you.
Marked50-
Both your points are erroneous. Studies show that people have about 1 or 2 orders of magnitude higher probablility of finding a job in the last month of benefit. Why do you think that is?
We are making due with the position until we can find somebody who can fill it. It is a position which cannot be filled by anyone.
About trains and cars. The govt largesse that you mentioned was motivated by efficient troop movements during an invation. NOT TO STIMULATE THE ECONOMY. Private industry took advantage of it without govt regulating incentive pay or dictating which technology should be used. So quit reading highschool hystory books and hit the library. Sorry, no koolaid or any kind of "DRINKING OR EATING IN THE LIBRARY".
"Larger benefits at least for this year will encourage some people, who may be unhappy with their jobs, to be unemployed while they look for something better. Others will be a little more reluctant to take a new job when they are offered it."
What a mind-blowing, totally inaccurate statement. Does John Lott really believe that someone would willingly quit a job or turn one down during this time of record unemployment? I know more than a few unemployed folks, they're not coasting on the dole while they search for a perfect job; they're looking for work. And I know plenty of people who hate their jobs, but not one of them is considering giving up for a lengthy stretch on unemployment.
Just a totally ridiculous argument, presented as a statement without any fact to back it up.
Dear JLuzar:
1) The current unemployment rate is far from a record rate. 1/3 of the time during the 1970s, 1980s, and 1990s the unemployment was as high or higher than it is now. You should go look at the numbers at the Bureau of Labor Statistics website.
2) About 1 percentage point of the increase in unemployment last year from 5.5 percent was due to the 50 percent increase in benefits that we had then.
3) The point is simple . If you give people more money only as long as they are unemployed, you will get more people who are unemployed. I don't know of any prominent Democratic economists who disagree with this point.
JTorr - if your collegue is waiting until his benefits run out to get a job I would question whether this is an employee I would want. Either one of two things would be in play here: 1) the job being offered doesn't pay much more than the benefits he's receiving or he has no ambition or self-respect.
Forget reading about economics and study a little pyschology; I would never hold a spot for someone who would rather collect gov't money than get up and go to work.
As to the article, fear mongering seems to be a tool for this administration as much as the last one. So now, as a nation, we are scared to death of the economy and the evil doers... Too bad we can't tweak the (unconstitutional) Patriot Act to lock away all the Wall Street folks forever without trials or phone calls - they have caused far more damage than Al-Queda ever could.
This article is right on. This whole economic crisis is being exaggerated for political reasons. Have you not been listening to the interviews of the people who actually lived through the Great Depression. They are offended that news media and politicians are comparing this to the Great Depression. They say far from it. One gentlemen said, "I still see a lot of hefty people in America. You didn't that back then - we were starving to death. I also don't see soup lines wrapped around buildings either."
As I said he has the skills we need and he has a good work ethic. That is the point... psychology. People see unemployment benefit as something they have earned, so it is easy to justify letting benefits run out.
So as you see it is not as simple as saying: "well maybe I don't want him to work with us." Socialism has destroyed the incentive of a lot of good people and most people do not understand how their production contributes to the economy. They don't have to understand in a Free Market Economy, since incentive keeps them producing. Take that away and you will be surprised on the people you will see doing nothing for a pay check.
Wall Street didn't cause the current problems. Barney Frank with his regulations and the FEd did it. Housing regulations and the Fed keeping interest artificially low during the last decade caused capital to be devalued and therefore lowering the risk/benefit ratio for banks to lend money to anybody. Lots of capital in the streets and lots of people, who couldn't afford to buy homes, buying caused prices to increase. That increase in prices made an incentive for builders to build more. And now you have a glut of houses and low demand because capital stopped flowing. Then you have panic. Ever since the govt started intervening with the bailouts and such, the movers and investors have stayed in the sideline waiting. If the govt had not intervened a lot of these people would have cut their losses and would have already started working on their new ventures and investments.
This is one of the most inaccurate articles read in a long time. Unemployment benefits are not enough to live on, but they are enough to buy food and utilities. You gotta be kidding to believe that exteneding unemployment benefits makes people less inclined to get a job. There are people looking for jobs for many months with no luck. Some need to go to school and get certificates. Unemployment extentions may help with that. Very unintelligent post and a republican fear tactic. Let me guess, you're not unemployed right now and could care less about others unemployed. All you want is a tax cut so you can increase your personal take home pay. This is a very selfish, conflict of interest republican tactic. Lowering taxes just makes the rich richer and it does not trickle down. The key will be infrastructure creation and to lead the world in green energy efficient products. Those things will hire engineers, construction, administrative, human resources, restaurants and even janitorial. But for those currently unemployed who paid their unemployment insurance something needs to be done to help those. To get unemployment you have to prove that you are continually looking for work, you don't just sit down and get a free check. So go write your inaccurate blogs on your bathroom wall or something. Complete inaccurate trash. For my background, I am highly educated in engineering management and hire and fire people not rich but make over 140k. I also understand unemployment benefits that barely pays for food and utilities. My guess is you are a bitter republican who clings to his gun. Feels Bush was the greatest thing for the world and that that the state of the economy is Obama's fault right now. Blind to reality. A republican.
By the way. In between jobs I took some time off when I had an offer which I accepted. But I did it in my own buck. So I understand why people with self-respect can take some time off. Add that to people feeling entitled to unemployment benefit and you have created a monster. So lets not make the mistake of believeing that pople do not adjust their behaviors once regulations and govt entitlements kick in. Wake up, the govt is about to make it worse with this bail out.
Idiotic logic.
The "highest compensated" workers making top wage receive about 360 dollars per week in unemployment compensation...thats a whopping 17,000 a year.
There is no one with sound mind that would leave a job, take a dramatic cut in pay and loss of benefits to go on unemployment!
Furthermore, in most states, if you voluntarily leave the company you do not qualify for unemployment benefits....
Bottom line is the economy is in shambles, the world is changing and those unfortunate people who have lost their jobs require extraordinary help through these difficult times. If that means increased benefits, increased length of time collecting benefits, then so be it...the 360 bucks a week will at least keep them fed, gas in their car and able to look for that next job....it certainly wont pay their mortgage, or allow them to "get ahead" economically.
Finally, to explain lower unemployment when benefits expire...its simple...when benefits expire, those people are no longer counted as "unemployed"....DUH...
For reference, I am an employed Director at a large fortune 100 company.
Go ahead...peruse the job market...the real question is...how many openings do companies currently have, as compared to one year ago...Thats how you determine the future prospects of the unemployed worker.
Waiting for a potential employee to accept an offer?? I don't care what the reason is...I expect answers to offers of employment within a maximum of 5 working days.
To jrtrr,
It is wonderful that you are trying to employ someone.
However, I suggest YOU take an economics course. I do not know what you do for a living, but I am an older woman who has been looking for a job.
Get off your high horse, because you, yes you could be hit hard by karma and this economic depression.
These comments just show how ignorantamericans are of basic free market economics. This is an excellant article that show the market has a response to how we act. but the market is uncaring and will react regardless as to the "social" consequence. Thus, as history show when governmant gets involved all the good intentions mat be there but they (the government action) will screw-up the free market. Ireally like the comments about what happens when the stimulaus money goes away and the jobs created are bogus
This blog is absolutely mind numbing and the whole crux of the problem. I see John Lott has bounced from one swanky University job to the next admitting he is only paid to think. Does he not read about the thousands of job losses EACH day? I agree with the other poster saying they are latching on to exceptions to prove their ideology. Since Nov. we have lost 1.5 million jobs. And not a thousand cutbacks here and there but tens of thousands of jobs eliminated. This blog is called denial and why the GOP offers no better solutions than the Democrats. The heart of the problem lies in the ruling elites of this country not understanding the problem on both sides and therefore unable to fix it. There are no jobs right now. If you cut off people's unemployment then you will have a run on welfare and other social services as people are unable to feed and house themselves and are literally put on the street. And who would want to go from decent wages to the poverty of unemployment wages and want to exist on that solely for over 6 months? If people stretch it then they probably never needed it in the first place. Over half this country lives paycheck to paycheck. That is insane and that logic is laughable. With the amount of job loss nothing will keep this UE rate down. The best you can even hope for is it remains steady. Not everyone was born with a silver spoon in their mouth and if this nonsense is what the GOP is pushing then they will continue to be a smaller voice. Attacking provisions on Hollywood tax cuts is one thing. But job loss has affected too many now to be politicized. It reeks not only of elitism but heartlessness and cruelty. Not moral values the last time I checked.
"Larger benefits at least for this year will encourage some people, who may be unhappy with their jobs, to be unemployed while they look for something better. Others will be a little more reluctant to take a new job when they are offered it."
What?! If you quit your job you are not entitled to unemployment benefits and if you turn down any job offers you could loose your unemployment benefits. Believe me no one is sitting around getting rich on unemployment.
Someone had commented that the employee might have made an agreement with his employer to get laid off...this person obviously does not work in HR! LOL
One more point. I see that you are still backing up your data when the economy and unemployment rate was much different. Looking at those stats now is pretty much useless since this is not a normal course of events. That is actually why the Obama administration is looking at data and programs from the Depression because I believe that is what we are in now and it will soon be referred to as such. Too bad they are making most of the wrong moves IMHO. I am sure you are also aware that they changed how unemployment was calculated in 1994. And given the standards of measurement then now we currently have a unemployment rate of 17.5% not the much nicer sounding 7.5%. It really is a national problem and epidemic. Please have some compassion for some of these workers facing a truly difficult situation For many it is not a case of simply being "lazy".
John,
Let me know how you feel on this topic. Not a lot of people are talking about the fact that one of the democrats first move when they took control in 2006 was to aggressively raise the minimum wage. My argument against that is not that they raised the minimum wage too much (it was probably too low when they got their hands on it) but they tried to make up for lost time too fast. Could the large increase in minimum wage be a bad thing for unemployment. It will only encourage the employers that employee minimum wage employees to find ways to cut jobs. Look at department stores as a good example they can now get rid of five cashiers install five self-checkout counters and have one employee do what five used to. Other places with minimum wage employees that are held to a strict budget are not going to be able to fit that wage increase into their budget, so instead the managers will take on more of a work load and let the low level worker go. We are coming up on another $.70 per hour increase this year and in these economic times I think that is only going to lead to more problems when it comes to unemployment.
Mark
Many people really misinformed. The jobs that would be created aren't nothing jobs. When you repair a bridge that can be a 2-4 year project. I had a roommate who was a civil engineer. They will need to hire civil engineer, construction crew, administrative, HR, buy materials and good for each infrastructure project and 100's are needed. We had a bridge fail in america on Bush's watch and americans died. I bet they wish Bush would have had an economic package with the bridge as an infrastructure project. The green jobs and green training will create long term green jobs like solar panel installers, solar panel creators, engineers to try to make more efficient panels and the teachers to teach them the technology etc. The other jobs created or saved will be teachers. We always as a country don't give teachers their respect. They are looked upon as expendible though we who are educated all have favorite teachers. 3 weeks ago the republican Prophet Anne couture wrote another book for republicans to worship. In the book she states that the biggest economic drain on the country is single parent families, unwanted pregnancies. I actually agree. Then a week later republicans are complaining on why is their contraception in the stimulus economic package, how is that going to help the economy they asked. This is how hypocritical republicans are. Anne Couter has the answer in her book that you all agree with. Contraception helps prevent unwanted pregnancies.
Ask Sarah Palin's daughter who was having unprotected sex as a teenager.
Obama is looking at what drains the economy and how to stop it, what can bring jobs to the economy and how to start it and what brings income to families homes and how they can keep it.
I have spoken
To educatedRon:
It may be that Pres. Obama has great and noble intentions with this Bill. The fact of the matter it is woefully short in the areas that need the most attention ie: social services at this point unfortunately and job re-training programs. With 11.5 Million unemployed you cannot wait for the years it will take to get these much hyped up infrastructure projects running. The biggest mistake he made was letting Pelosi and Reid craft this Bill. That was just asking for problems. And let me add there is only 1 Billion for small business owners. What kind of stimulus for job creation is that going to do nationwide? As far as Ann C and her book I agree with the premise but this is red alert time and we don't have the money for everything. Let them propose it in different legislation and pass it on it's own merits. I am far from a Republican and a registered independent that leans right. And I also agree that it is hard to listen to the Right talk about fiscal responsibility when they inherited a surplus and ran up these record deficits. Now to be stingy is not really good political thinking. It is not good form to attack unemployment when Wall St. just gave out 18 Billion in bonuses and they passed that bailout as well with more questions asked about an unemployment fund than the TARP money. Where are the priorities I ask? And to the other poster asking if minimum wage was the culprit. In your wildest dreams. Excessive executive pay and perks like a fleet of corporate jets is the problem. Not the lowly minimum wage worker. How many people lost their jobs to finance the $50 Million jet that only seats 12 that Citibank was going to take delivery of? Now do you see where the money is going? It most definitely is NOT going to the workers my friend.
Ha...Ha... I see a lot of frustrated Keynesians reading your blog. I guess we are about to have a new generation of free market capitalists once this bail out and the next one fails.
great blog... Maybe they should read Rothbard.
Obama: "...rewarding executives who have failed." The current Congress - I've been paying for Nancy Pelosi's "Fat Cat" plane for over two years. It should go immediately as punishment for a job "Screwed-Up".
To the man with no name. I respect your post. The package has a short term, medium term and long term. I would consider the contraception medium to long term. We as a country need to take STDs and unwanted pregnancy's seriously. I think its safe to say that no one should ever catch an STD. There should be no more new cases ever again. As far as red alert, its more than 1 billion for small business, there is about 300billion in tax breaks for small businesses. The package is very good. Its not (from what I gather) not even finished yet. When it is Obama will post it online for 5 days since that's his word. I consider myself a lifetime republican who voted democratic for Obama this year. People attacking contraception when its less than .05% of the total package. People need to know which battles to fight. Obama had that taken out anyway. Its just when I hear the right say "what does contraception have to do about the economy" that I get upset, because it is related. You have to pay health workers a lot of money to deal with patients of herpes and aid all day. So I respect your post, but disagree with a lot of points. This package has a red alert portion, medium and long term. 1billion only to business is a misleading republican type of statistic. People really upset at this bill, but 700billion to banks with no accountability is no big deal. The banks used the money as pure cash, pure investment capital. Made a plan of which banks they could buy for pennies on the dollar. Loaning requirements are higher now when legislation should have been there to soften it.
One thing they should put in is that if you have an adjustable loan, it can be refinanced to fixed up to 110% LTV if you have an above avg credit score. Instead you need 70% equity (in my area) Pristine Credit to be considered. This is banks who got 50billion. No one is complaining about this since it was done on the republican right's watch. We are watching political greatness take place. Obama is extremely transparent and so extremely transparent that republicans can and do and have attacked everything about him, even his cell phone. One attacker said he lied to his kids since they don't have a dog yet. The bitter republicans who cling to guns are ridiculous. Obama can also be candid and admit a mistake. What a relief to hear him say that. Bush was in denial until his last week or so in office.
No more bailout money. If all the politicals paid their taxes and fees, we would be in better shape. We bailout and they get bonuse?? I don't think our gov. is very smart. As far as I'm concerned; you choose, you lose. Why are we paying these companies for mismanagement????? Yah----
I am surprised that people like EducatedRon read this blog. This guy has no idea that he is clueless. Can you read this stuff he writes? He sure has a plan to get the economy going. Going down the drain. Ha ha...
The point made that by the previous poster of "1 or 2 orders of magnitude higher probablility of finding a job in the last month of benefit" is used to justify their belief that people are gamint the system. This is typical of conservative thought of the worst of human nature. Could it be that it takes people that timing to find what they think they need in regards to jobs, in some cases maybe not what they want but what they need? I don't know why this may be the case but it is erronous to assume it is because they are squeezing the most out of unemployment.
There are two things that appear around "conservative" thought. One is assuming the worst around human intention and the second is that change is bad unless exclusively market driven. This Conservative thought would be that the unemployment of farriers would be bad vs tire repair due to technology shifts. A spurious rejection of the change based upon the shift of employment requirements- driven by popular demand- either for security or market demands. The distinctions get lost when crying against something that appears to be related to change driven by popular demand no matter the motivation.
I'm amazed that Lott is still pushing the myth about the New Deal prolonging the Depression. Economists (other than Fox News Infoconomists)are practically unanimous that the New Deal has formed the bedrock that the US's economic policy for the past 70 years has been built upon. Its biggest fault was that it didn't go far enough.
I hear from right wingers all the time that it was WWII which dragged us out of the Depression. As if there is something inherent to wars that give them the ability to end depressions.
The economy was stimulated when every factory, textile mill, farm & sweatshop in the country was suddenly awarded a government contract to run their facility at a balls-to-the-wall pace to supply the war effort. Factories were re-tooled to manufacture tanks, ships, uniforms and C Rations. People suddenly had jobs (Even the ones in uniform) and cash in their pockets. At the end of the war, returning soldiers had their GI Bills and bought homes and educations, started businesses, spent money and kicked off the biggest boom in history. All this in less time than it took Rumsfeld to get up-armored humvees to Iraq.
So suck it, conservatives. Gov't CAN be part of the solution, and it looks like Obama has the right idea. If anything, he's wasting too much time trying to appease whining conservatives. Remember them? They're the ones who turned a surplus into a deficit faster than you can say, "Where'd my paycheck go?"
When it comes to stimulating an economy as large as ours, you'd better come high or stay at home!
What a bunch of sheep! Do you actually believe this garbage? The majority of Americans do not enjoy being unemployed! For the majority it is embarrasing and on top of it it is not enough money to do the things and maintain the lifestyles most Americans want. Right now there are a ton of people out of work and how do they get new jobs when a new 20k is being laid off daily? I guess Obama should leave this out of the plan and continue to let employers pay for it since they refuse to hire. More layoffs and no expansion means no consumer spending what part don't people get? This is a viscious cycle and it cannot continue. No one is stepping up so the government has to.
Dear D:
Unlike you who neither cites evidence for your claim about what "Economists (other than Fox News Infoconomists)are practically unanimous" about nor are an economist yourself, I do provide links in the op-ed piece at Fox to two survey articles by economists that discuss what the evidence is on these points.
Dear FreddyVasco:
No one said that the vast majority of people like to be unemployed, but the percent of the population being employed has only changed from 95 to 93 percent. The question is if you have a 50 percent increase in unemployment insurance benefits last year and another increase on top of that this year you can get some people to look longer before they take a new job and others to be willing to leave jobs that they might not like too much.
D-
I don't care what conservatives say about what got us out of the depression, but it wasn't the new deal or WWII. To say that a war can be a good for the economy is like saying that a lobotomy will cure a headache.
What got us out of the depression was that after WWII the government abolished most New Deal programs and stopped harassing private industry with regulations. So basically, we went back to Free Market capitalism. Why would that have happened? Uhmm... Well, 1st you had different politicians in the White House, and 2nd we saw how the Germans steamed rolled over the Soviets and their “socialist utopia”. The govt learned that the socialist system was a failure, since Germany with its meager resources and a system that was 10 years old could squash a behemoth like USSR and we had to supply even the engineering plans for Soviet armament. So there! What got us out of the Depression was getting back to the Free Market Capitalism.
This argument of "every factory, mill, sweatshop" making things on govt orders is absurd. The only time during the 30's and early 40's that unemployment decreased was when the govt drafted 12Million people into the Armed Forces.
Also I don't know how you define wealth but when every factory retools to make armament, they are also not making the stuff people want. Stuff like cars, refrigerators, soap bars. Talk to someone that lived through WWII and see what they tell you about the scarcity there was. Is that what you call being out of the depression. It also sounds that you yourself are advocating the “WWII got us out of the Depression” fallacy.
So some… I stress, SOME people were making money, but there was nothing to spend it on. So they saved. And after WWII when the govt stop telling industry what to make and build and allowed demand to drive where the jobs should be created, that allowed people to spend that cash on whatever they wanted. That is Free Market capitalism.
And just for your information. Look this up. There might have been a surplus after Clinton left the White House, which is not hard when you raise taxes and butcher the defense budget, but Clinton handed Bush a recession. Probably MSNBC didn’t tell you about it, but is true. I dare you to bring this up at your next cocktail party.
The stimulus package sucks.
I'll be the first person to admit that.
I've spent a lot of time researching this and documenting it at http://www.KeepAmericaAtWork.com and my analysis tells me that the real problems are:
1. We have done away with over 1,200,000 jobs that paid 96,000 each from 2001 - 2007 and we replaced them with jobs paying 34,000 each.
2. For my Barely Making it Article, I found out that only about 1/3rd of all Americans make more then 52,000 per year and we all know from our own experiences that if you are making a total household of 52,000 or less, you have no money to buy things unless they are essential.
These are the reason we are in the shape we are in.
Don't believe me, go to http://www.KeepAmericaAtWork.com and download the free report and take a look at the article titled "Your wages do matter" and it will open your eyes.
Virgil
http://www.KeepAmericaAtWork.com
I don't know how the myth got started about Clinton leaving a surplus, but it isn't true. You better check out the difference between a consumer surplus and a government surplus. MSNBC has been telling these people that for so long, they actually believe it! And, you're stooping pretty low when now you are actually going to blame bridge collapses on Bush. Get a grip. Also, check to see where the stock market was when Bush took office and compare it to where it was in 2007 when the subprime mortgage mess began (which was Clinton's bright idea - let's let every American buy a house whether they can afford it or not). Also check the unemployment figures during the two presidencies. There also has to come a time when policies and procedures have to be a moral issue and not a government issue - but, the liberals helped do away with morals years ago - and hence - look where we are today!
People creating demand because they have money to spend - and that demand stimulating production creating a boom in the economy?
Why jrtorr, you have just described why Keynesian economics work, and why "trickle down" is nothing but a pathetic and misguided joke.
jrtorr:
http://iws.ccccd.edu/kwilkison/Online1302home/20th%20Century/DepressionNewDeal.html
http://www.infoplease.com/ce6/history/A0835397.html
"Further, the political consensus that developed after World War II held that never again should the government allow another depression to take hold. Thus, there followed an unprecedented level of federal economic intervention. This huge expansion in the role, size and power of government in American social and economic life is aptly summed up in Republican President Richard Nixon's famous 1971 remark, "We're all Keynesians now."
The thing that ended the depression was getting people back to work. Plain and simple. When people have jobs, they have money to spend.
I never said that factories were making consumer goods. Shuttered factories were re-tooled to produce goods for the war effort. Auto makers started making jeeps & personell carriers, shipyards made carriers & battleships, and textile mills made uniforms. Farmers supplied goods to feed the troops. Everything was rationed because all consumables went to the war effort.
After the war, the regulations were increased, if anything out of fear of another great depression. Unfettered capitalism caused the problem and regulation & oversight keeps it in check. This has been the foundation of our economic policy ever since.
As for Clinton's recession, when the .com bubble burst in '99 it caused about a 3 month ripple throughout the economy which economists still argue over whether or not it qualified as a recession. Regardless, it took the Bush administration 5 years to recover, and in the meantime they became the first administration since Hoover to preside over a net loss of jobs.
You need to turn off Fix Noise and Rush. Get your history from folks without an ideological axe to grind.
Besides, GHW Bush cut the military more than Clinton ever did.
The DOD has a good website with helpful historical data.
Mr Lott,Mr.
I don't blog because I am generally studying,I'm attending community college in Randolph co.,N.C. One of the worst hit areas in the Nation in unemployment,and also one of the top areas in the nation for illegal alien population.I was impressed with your credentials at the very impressive universities and colleges you have worked at and attended.I was also impressed with your knowledge of economical statistics.I was also impressed with the blogger who used one example of one incident,of which he did not dare disclose the full truth of the incident,to judge and catagorize millions of people.But what has absolutely impressed me the most is the almost perfect ignorance and disdain that you both have shown for hardworking,honest Americans that have lost thier jobs due to the fact that products can be made here by illegal aliens and over seas by under paid and sometimes political prisoners.The average wage here is $9-$12 an hour,$380-480,subtract $100 for taxes,$130+ for health coverage of which $25-$50 goes for co-pay,add 20% of a$225 doctor visit+ gas $50-$100+ power bill+rent because the majority of these hard-working Americans can't afford a home+ groceries, they have to feed thier children , it's a felony if they can't.By the way it's a felony to illegally hire an illegal immigrant and it's a felony to illegally work in the U.S.But that aside.These families have to some how get dental care for themselves and thier children,how much did you spend on yourself and family? Buy tires ,insurance and auto repair,child care,And at every point that they spend any money for these needs they are taxed and taxed again so that almost half of what they make goes for taxes.Does your university rely on these people's money? Is your job riding on these Americans backs? If they loose thier jobs because the execs can't find it in thier heart to cut thier multi million salary by a few million to save a few thousand jobs,they will recieve maybe $200.00 a week x 2,mother and father,no health care,because they make too much to qualify for the health care that is making you poorer,of which thier tax dollars paid for,of which they have to watch while illegal aliens' children get treated by doctors and get thier medications paid for knowing that it has been thier work and money that has created the jobs in a system that turns thier children away.And that makes you poorer.I'm an student of history and the only thing that is keeping this crises from turning into a full blown revolution is the spark.Look at history, if Obama and congress do not deliver comments like yours will all thats needed.Never under estimate the passion of a parient watching thier child suffer while millionairs are legally stealing from thier children. I doubt you'll even have the courage to let this blog thru.
I don't know what Fix Noise or Rush is, but don't watch much TV so there you go.
After the booming 20's, the govt, Hoover specifically, started intervening in agriculture with regulations. There was an agricultural boom due to the lack of European agricultural output due to WWI. But at the end of the 20’s Europe was coming back and that’s where your glut came from. Simply said, in “unfettered capitalism” those jobs would have moved from agriculture to other areas. But Hoover decided that it would be a catastrophe for so many people to be laid off. So he started telling farmers what to sow and subsidizing some not to sow some crops. Because the govt is slower that the market to adjust, most times they ended up with glut of product. To avoid price depreciation due to the glut in some specific produce govt started buying the produce. By keeping prices high, govt created incentive for other farmers to keep sowing those same crops. Vicious cycle anyone. That started a vicious cycle of govt disruption and regulation that only increased with FDR. Just about every New Deal program was an extension of the Hoover administration programs. So lets cut the partisan blaming game here. Both parties have caused economic problem. So if you are going to turn this into a "Democrats Good and Republicans Bad" then you are probably reading the wrong blog.
If Keynesian theory is so good, then just send people a check and have it spend it in what ever they want.
As far as the jobs that will be created, what safeguards are in place to prevent illegal aliens from getting those jobs & sending the money out of the country?
The Democrats are trying to shape their ajenda not offer a true stimulus.
One sure fire way to jump start not only America's but the rest of the worlds economies is to fix the problem. since no one is interested in doing that, prepare for a long run.
Now, I'm aware there is no room for logic in our political system, and logic is certainly foreign to a liberal.
So the Government wants to spend a trillion dollars to fix things. which would work if they knew what to do with it. Their plan will work for people in certain fields, while drastically destroying the fabric of our economical system.
If you want a 2 class system of the poor and the rich support the stimulus plan. If you would like to hope that one day, your children or grand children would like to get ahead, and start a business, this plan is not for you.
The recipe for disaster:
Good intention (reinvestment Act) mixed with greed, add in a dash of Democrat lead senate finance commity cover up, of Fannie and Freddie creative book keeping.Distract with endless reports on Iraq, Mix with Obama trained ACORN henchmen forcing bad loans.Finally when a surge destroys your distraction, Blame George Bush.
Now what would really fix it.
Simple, Instead of the Government spending where they see fit, reimberce the Homeowners who have lost greatly on their investments do to Government interference. Send a check for 15,000 to every single homeowner. Only to homeowners and multi homeowners only get one check. Make sure any homeowners in trouble have to refinance with it.
Homeowners in good standing can choose their use of the money. people who have paid their home off can use the money for improvements.
the bottom line Mortgages will be back in the green, banks would have positive books, and money would be available to lend again.
the recovery time 2 to 3 months
rasguy24-
Not bad ideas. But you still have a glut of homes in the market and that will take time to clear. So some banks, construction co. and individuals will have to cut their losses. Hey you take risks and you take the losses when they come. Besides that, there will be some unemployment, which reduces inflation by increasing the supply of labor, and allows redistribution of said labor into industries where there is real demand, not just some artificial demand created by this so called stimulus. You can read Edmund Phelps on how labor is a commodity which goes through some cycles of unemployment which allow Free Market to adjust. That redistribution of labor takes time, as it requires retraining for some. This could be politically undesirable seeing that the incumbent takes the blame, which makes politicians try to fight it. But realize that the politician if fighting for his own survival, not yours, or the economy’s for that matter. For some people who have written in this blog it is an emotional issue. I don’t deny it is, but as a scientist I cannot deny the workings of the Free Market just because some may go through the painful experience of loosing their job, that may include me. What we need to do is allow the market to recover, so that those people can get their independence ASAP. Programs like extending unemployment delay recovery and may cause a recession to deepen. Nobody is advocating to get rid of unemployment benefits, but Clinton himself cut benefit time and achieved a record low unemployment. Surprise, surprise… So all this stimulus will do, is delay recovery.
Ironically it will be good for some of us in the scientific community thanks to the science pork they have attached to it. But I am not going to lie to you and tell you it will be good for the economy, just because it is good for me. I just hope it is the last one of these.
jrtorr-
Nearly four jobless for every job:
The Bureau of Labor Statistics this morning released data showing there were 3.8 job seekers for every job in November 2008, up from 3.4 per job in October and from 1.8 per job a year earlier. “It’s getting harder to find employment than to be accepted at some elite universities,” said EPI economist Heidi Shierholz. “Seeing nearly four unemployed workers for every opening is a sobering indicator of how difficult it is to find a job in today’s weak market. With so few job openings it is easy to understand why nearly a quarter of unemployed workers have been out of a job for over six months.” The numbers are from the Job Openings and Labor Turnover series, or JOLTS.
The Congressional Budget Office (CBO)- says that extending
unemployment benefits is one of the most cost-effective and
fastest-acting forms of economic stimulus because the money
is spent quickly.
Maybe instead of forming theories at the University job,which is most likely subsidized with taxpayer money, try stepping out into the real world. Not only is it heartless and cruel to go after people truly on this bottom of this economy it doesn't even make good economic sense. Your theories have failed and you don't need a Phd in economics to see extending unemployment is not only the right thing to do but also makes good fiscal sense. But complaining about Govt. when you actually benefit from public money makes you a first class hypocrite. And on this issue dead wrong. People can't just go back to work when there are no jobs. Like I said, a reality check is in order. Your statistics and theories don't reflect the situation.
Dear the man with no name:
Apparently, you don't need to read what I write to comment on it. The Keynesian argument you are quoting has problems:
"But this is nonsense, because it views savings as the equivalent of putting money in your mattress. When people save, they leave money in their banks or money market accounts or buy stocks or bonds. The money doesn’t disappear; it is given to someone else who spends it. If you put your money in the bank, the bank loans it out. If the person who the bank loans the money to leaves some of that money in their bank account, that money is lent out." [END OF QUOTE]
If you give money to people, you have to take the money from other people. The net increase in spending is ZERO. But as my piece here shows, you will get more unemployment.
Man with no name-
So I am a hypocrite even when I am telling you that I am against the stimulus package that will be good for scientists like me but not for the economy. I am telling you that there is science pork that will do nothing for the economy. If you ask me NIH and NSF budgets should be cut. That would reduce the glut of PhDs there are in this country. If I loose in the competition for funding and end up unemployed because of that I'll go back to industry. I have worked since I was 13 years old. I have worked in industry, in govt labs, and in academia. I have been middle class, and I have been poor also. I have been gainfully employed and unemployed too. I made a personal decision that I would drive a cab or clean floors with my degrees before sitting in a waiting room, waiting for a govt employee to use their infinite wisdom in order to decide if I am worthy of a govt handout. Or some union, for that matter, to conspire against my employer and then promise me a job security they cannot provide. Because of that I save and invest like you wouldn’t believe, depriving myself of luxuries some of my neighbors have, but who clearly make much less than I do. I have seen those same investments decrease with the market, but I am not panicking like you. In the most expensive state of the union my family lives off of one income, even though we are 2-income household. So if you have so much heart, you can start by raising the low expectations you have for your fellow citizens.
Have you ever wondered what having the promise of unemployment does to people's incentive to save and invest for rainy days during times of plenty? If you take money from individual A to give it to individual B, how does that stimulate the economy? As the article says people who save are making capital available for banks to lend. Banks will either lend it to someone who will use it to pay for something they value, or lend it to someone who needs capital to expand a business for which there is demand. The only way you stimulate the economy is producing something somebody else values enough to exchange the product of their own labor for it. It is not spending for spending's sake! This is absurd. What is so difficult about this that you are still clinging to the Keynesian theory that converted the recession of 1929 into the depression of 1933?
According to your theory we should make unemployment benefit time unlimited.
People should not be shocked by what is coming out of Washington. America voted for a liberal socialist, so why would America be suprised when socialist policies come out of the white house? Hope you like your "Change", America.
How is this for heart? Allow employers to reduce salaries commensurate with profits and current output. That includes yours, mine and anybody else’s as necessary. This will give another degree of flexibility for the economy to adjust and recover. It will also reduce lay offs, while not really being adverse to individuals personal economy since inflation has decrease during this recessional period. See if unions will allow you to do this. And I will actually mention that it is not spending what we need at this point, we currently need saving and reinvestment so that business can realign their production and tooling the new demands.
This is the silliest piece of tripe I’ve read in a long time. There are so many logical fallacies, dubious unsupported assumptions, and ridiculous pronouncements herein that it’s tough to know where to start. So here goes:
“Unemployment benefits increase unemployment.” Says who? People are going to try to get fired during a severe recession to draw unemployment benefits? [If you just quit you don’t get benefits.] This is a ridiculous, unsupported statement, and anyone who gave it a moment of thought should realize this. Look how many people are getting laid off the old fashioned way. 600,000 more in the last report.
“By moving money from places where it is currently being spent to places where the government wants it spent, you move the jobs also.” Seriously? Someone should look up the definition of “recession”. The problem is that the money ISN’T being “currently spent”. The objective is not to MOVE jobs, the objective is to REPLACE LOST jobs. Pick up a bloody paper before making statements this silly.
“It takes time to find the job that fits your interests. You may quit your current job to have the time to search full time for the new one.” My God, this is clueless. Does you think the entire purpose of the stimulus is so that employed people can go job shopping?
“Even just the threats of the stimulus plan being passed cause companies to change investments today, and that creates more unemployment now. The stimulus plan is creating unemployment even before it goes into effect.” The moon is made of green cheese. This is a ridiculous statement with no support whatsoever. Prove it. Provide a reference, an example, or even a suggestion as to how this might be occurring. Otherwise it is as painfully silly as the rest of the editorial.
“One thing is clear. [Right.] The government will spend money in different ways than people otherwise would have spent it. [But they AREN’T spending it, which is the problem.] And that means change, and change means temporary unemployment. [RECESSIONS mean unemployment.] Unfortunately, just as the government regulations that caused the financial crisis to begin [WHAT??? Doh!] with had people turning to government for more regulation, the turmoil and unemployment created by the government stimulus will cause even more to turn to the government for help.”
What a breathtaking pile of clueless manure.
* * * * * * *
“The point is simple . If you give people more money only as long as they are unemployed, you will get more people who are unemployed. I don't know of any prominent Democratic economists who disagree with this point.” Overly simplistic, and very, very poor scholarship. Which Democratic economists have you researched or talked to about this point? Does job search behavior and response to unemployment benefits vary during a recession? Does eliminating unemployment benefits completely create 100% employment? No? Then what assumptions are you making about the optimum levels of benefit duration? Just “more is bad”? Are there any negative economic or societal effects from reducing unemployment benefits?
It certainly appears that you have no bloody idea what you are talking about.
jrtorr
True there will still be some adjustments to labor. The whole world's labor force needs adjusting.
However there is no clear direction for labor to go either. This Admin wants to push ethanol as a major part of energy reform, which will need to be changed by the next Admin.
America has the opportunity to take control of the worlds energy supply simply by changing the source of fuel. ( I believe McCain/Palin would have done just that.)
The Dems can not fix labor problems when the unions pulls their strings. This fact ties this Administration hands when it comes to labor issues. Thus we will be bailing out the Auto industry repetitively. For at least the next 2 years.
Obama said he wanted a trickle up solution, banks and giant corps. are not trickle up, it's trickle no where.
jrtorr -
To me you still don't get it. In my opinion, you would have MUCH less Govt. intervention by simply extending unemployment insurance, than dealing with the fallout of people unable to provide for themselves. I have never understood Republican's thought process' on this. If this simple check allows people to provide basics like food and shelter why with hold it causing people to lose that ability? I see you are also blaming people that have not saved. This is also wrong I think because how much should people have put away? If they qualify for a extension they have most likely exhausted what savings they had being unemployed for over 6 months. $200/week UE will not pay for everything. Please look through your local papers want ads. The only jobs I am seeing is healthcare, which requires training and certification in most instances. So even if you got people re-trained this takes time.
If you want to blame people for supposedly living beyond their means I think that is an excuse, which ignores the realities of this CURRENT situation and data which shows not only loss of wages for the past 8 years but also the sharp increase in food,shelter,healthcare etc. I am not advocating unlimited unemployment, which is always the last ditch argument from the Right's idealists, but extending it until there is proof of not only containing the record job loss but also data showing that jobs are indeed being created. The elephant in the room,no pun intended, is the job loss. And I see no answer for this except faith of economic theories, which take time to implement, as you readily admit. That is what people on a unemployment extension don't have.
I like your idea of limiting pay based on company performance. That's the way it should be. And I already took a pay cut and pray every night not to be unfortunate enough to lose my job as well. But pay limits would violate your free market beliefs would it not? I think some regulation would have avoided much of this and I know both parties have a hand in that. But to argue against an extension ignores too many facts when this is shaping up to be a depression not a recession so drastic measures need to be taken. And think about it what really avoids more Govt. intervention a extension or the fallout from homelessness and more foreclosure? I never thought I would see either party argue over ideology at a time like this. Free Market arguments I think are pretty much over and died Sept. 2008. This is all symantics now just like arguing against a unemployment extension in the time of record job loss for ideology reasons. That is so tone deaf and off the mark I don't think I can read and keep arguing on this blog because it really upsets me honestly.
It's amazing they continue to let people be thrown out of their homes while arguing party points and that there are people blinded on both sides by politics to think that is moral or right in anyway, especially in light of the rip off the first bailout is proving to be.
I agree with J. Lott's original argument of not interfering but now that has been done I find myself thinking maybe they SHOULD nationalize the banks to keep this country from being completed taken down by the greedy insanity on Wall St. None of those executives could find it in their heart to take a pay cut to even save thousands of jobs at their own companies. That is truly disgusting and I don't see how it's defended. So sorry if me and a lot of the American public don't want to hear from these sharks now how nobody should get unemployment when they could not even forgo their own bonus pay. Think about it and you might not find that cab or janitor job in this economy. Things have drastically changed. Wake up.
Interesting to attack the building of roads and bridges. I wonder how many would attack it knowing it was established under a republican administration. Thats right Eisenhower. The 8 hour workday or 40 hour work week was implemented in many countries prior to the US. It was not until 1938 that it actually became law in the US without OT pay. However, when the Ford motor compnay implemented it in 1914, PRODUCTIVITY ROSE. I also find it difficult for people to accept a pay cut of 20 percent to "cash in on unemployment" Isnt it strange that while unemployment rose under the BUSH administration, as the rolls started decline, the number of Americans in porverty and receiving government assistance rose. Just food for thought.
ive said it before and i will say it again.
john your an idiot!!!!
so the unemployment raise is for just one week or up to a year??
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