House of Eratosthenes

“Christmas is 10 days away,” said Pelosi at a press briefing on Capitol Hill today. “The president and Democrats in Congress have been very clear. We’re not going home without enacting a payroll tax cut for America’s working families and extending unemployment insurance for millions of Americans.”

“The payroll tax cut that the president proposed would put $1,500 in the pockets of 160 million Americans,” she said. “The unemployment insurance extension is not only good for individuals. It has a macroeconomic impact. As macroeconomic advisers have stated, it would make a difference of 600,000 jobs to our economy.”

Pelosi did not name those “macroeconomic advisers.” She continued: “Again this is important because this is about the safety net not just for these individuals, but for our economic system that, in times of unemployment, we have a safety net and that is important.”

This is a constant in progressive rhetoric, I notice. Put the money where we tell you to put it…and, see, when you do that, [whoever gets it] is going to spend it, and that will invigorate the economy and create jobs. Wheeeee! Whereas, if the money was left with whoever had it in the first place, who knows what they’d do with it. Wipe their butts with it or something…

Neal Boortz does his best to present the counterpoint, although some certainly won’t appreciate the message too much:

The fact is that the money for unemployment benefits comes from somewhere: either we get it from taxes or we borrow it. This is money that could have otherwise been productive in our economy or money that we didn’t have and now we have to pay back (with interest) sometime in the future. Hence why Nancy Pelosi’s theory is flawed. We can’t create jobs by simply shifting around the wealth.

Last time we were having this back-and-forth about unemployment benefits and jobs, this guy explained it very well:

If it seems counter-intuitive that paying people to not work actually raises the output of a nation, that’s because it is.

Nevertheless, a number of major media outlets have repeatedly quoted reputable economists as saying that the best way to boost the nation’s economy is to continue extending aid packages to America’s unemployed workers. Depending on the economist, the quoted return is anywhere from $1.61 to $1.90 for every dollar spent on extending unemployment benefits.

The logic here is that recipients of unemployment benefits tend to spend the money soon after receiving it, and they spend it on essentials such as groceries and bills, rather than on frivolities like dining out or going to the movies. Since the benefits are spent this way, it creates a ripple effect that actually helps drive the economy.

Unfortunately, the positive impact of these benefits on the economy is neither sustainable nor viable over the long term. Although the short-term benefits provide an immediate relief, it is the kind of relief an addict feels after a fix. The initial high will eventually fade and the pain of withdrawal will settle in worse than before.

In fact, the addiction analogy works on a number of levels when it comes to extending unemployment benefits. Although the relief felt by both the economy and the addict is real, the source of the relief is artificial. Rather than experiencing the genuine economic relief that comes in the form of an increased demand for goods and services, the federal government is infusing the economy with borrowed capital that must eventually be paid back. This means that even after the economy begins to recover, the effects of the recovery won’t be felt by the bulk of Americans until this borrowed money is repaid.

And for those who are demanding some hard research, rather than theory (even though what the theory is saying, is that you can’t sit in a sailboat and make it go by blowing into the sails), there is some:

Simply put, it took people with unemployment benefits longer to find jobs than those without benefits. That alone may indicate that unemployment insurance is a disincentive to find work, but the study’s author, Dr. Carl Van Horn, says that is not exactly accurate.

“Younger workers with limited labor experience are much less likely to be eligible for unemployment benefits” said Dr. Van Horn, and they don’t even apply for benefits.

The study found that unemployed workers who had not received unemployment insurance in the past year were somewhat younger and had lower incomes to begin with than unemployed workers who had received benefits.

Dr. Van Horn says those younger workers tend to, “…earn slightly more than minimum wage, they are high school graduates, they cycle through jobs very rapidly and don’t stay in them for long periods of time. They are the working poor they are struggling to get a job and move on.” He went on to say, “The middle class are more likely to be eligible for unemployment insurance and for them to find a replacement job that is at or near their previous earnings is much more difficult in this recession.”

Other findings indicate just how hard it is to get back on your feet in this economy. Forty three percent of the people in the study found full- or part-time jobs and just over half them took pay cuts in their new positions, while 41% were still trying to find jobs and 16% gave up and dropped out of the work force.

“What we found is that number one most of them have been unemployed for so long that receiving unemployment insurance is not sufficient to stave off the financial crisis they are experiencing” said Dr. Van Horn.

He hopes the study will dispel what he calls myths about unemployment such as “everybody gets unemployment insurance.” Dr. Van Horn says that’s not true, only a third of unemployed Americans right now actually receive benefits. He points out that some, like those younger workers, are not even eligible, others have exhausted their benefits and some never apply.

“The most important thing (about the study) is that a large number of people who don’t get unemployment insurance and even if you get unemployment insurance, it’s not a vacation, not a picnic. It doesn’t solve the financial problem they have.”

One rule of inference and prediction that has never let me down is: Everybody adapts, in some way, to everything. If consumers are feeling tight with their dollars, the businesses are going to anticipate a dwindling revenue stream and look for ways to cut expenses. If everybody picks up a certain amount of money being unemployed, then even valuable employees will be “parked” by the businesses — let go, told to re-apply, maybe we’ll re-hire you when things turn around again. If it actually works that way, then the employee has been converted into a sort of rental commodity. Rent the employees just like you’d rent a car: Define the need, pay for it as long as you need it, when you’re done return it to the state which is the actual owner of the “car.”

The government as a temp placement agency. I suppose there’s no shortage of people running around who think that’s how it’s actually supposed to work.

Once upon a time, I was a temp. It worked great for my needs, back then. I was 21, and my apartment rent was the only financial obligation I had on the entire planet.

Envision a future in which this is the picture of the average American subject/citizen. What would Speaker Nan have to say about how well the economy is doing, in such an America?

you can’t sit in a sailboat and make it go by blowing into the sails

And here’s where I don my pedantic physics guy hat and say that that is not entirely correct. Newton’s 3rd law definitely applies: the wind exiting the front of the fan equals the air ejecting towards the back. However, you’ve neglected one point here: air has mass. What this means is that the air moving forward out of the fan will impact the sail and transfer its momentum to the sail and, by virtue of a more or less rigid mass, then to the boat itself. The boat will then slowly-very slowly- move forward.

I’m pretty sure that empirical evidence exists to support my Newtonian analysis, probably on Mythbusters or something like it.

What does this have to do with the topic at hand? Nothing. I just like working physics problems in my head.

Yeah, I was a real chick magnet for most of life. How I managed to find one to marry me is still one of the great unsolved mysteries of the universe.
- Physics Geek | 12/19/2011 @ 11:01
Okay, I’ll bite:

Newton’s 3rd law is taking place entirely within the vessel. In other words, for every Newton (or thousandth of a Newton) acting upon the sail mast in a westward direction, that much force is being placed upon the seat under your butt, eastward, due to these massive air molecules being expelled from your piehole…resulting in a net of zero.

Thought my analogy was expressing all this through implication. Am I missing something here?
- mkfreeberg | 12/19/2011 @ 11:05

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Unemployment Benefits Create Jobs?Monday, December 19th, 2011

Unemployment Benefits Create Jobs?
Monday, December 19th, 2011