Free Markets, Free People


And after that, let’s raise the minimum wage to $100/hr

It’s true that to be a progressive, one has to have the ability to believe nine impossible things before breakfast. But, surely even progressives have some limits to credulity. I’d like to think so, but then I see something like this, that even the barely literate should recognize as foolishness.

President Obama has lately been pushing a number of policies that he says will create jobs, including extending unemployment benefits. This is puzzling, since new benefits obviously will not create jobs for unemployed people, who after all are the ones who need work. But White House Press Secretary Jay Carney explained Thursday that paying out unemployment checks “is one of the most direct ways to infuse money directly into the economy because people who are unemployed and obviously aren’t running a paycheck are going to spend the money that they get. They’re not going to save it, they’re going to spend it.” True, they probably will spend the money, on their mortgages, on food, and other necessary expenses. But Mr. Carney attributed miraculous qualities to these government handouts, saying “every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring.”

Of course, unemployment benefits do none of those things.

Quite apart from anything else, unemployment benefits are usually far less than than, say, an actual paycheck from an actual job. The very best that might be said about unemployment benefits is that they cause job losses overall to be slightly less severe than they might otherwise be, as the distribution of said benefits ameliorates the chain reaction of job losses as unemployed workers receive some money, rather than no money at all. And, of course, it prevents the jobless from going completely under financially.

But to believe Mr. Carney, one must believe that larger numbers of people receiving and spending substantially less money creates more economic growth. This is magical thinking. If it were true, the obvious solution would be to completely shut down the productive economy, and provide every inhabitant with a government dole check. No doubt economic growth would explode if Mr. Carney were correct, although who would then be available to fill the millions of new jobs is quite beyond me.

Further, it could be argued that for low-skilled—hence, low-income—workers, extended unemployment benefits are a positive disincentive to get a job at all. After all, why work 30 hours a week delivering pizzas, if, in return for an abundance of leisure time, you can simply cash a government check every week? And, perhaps, do a little work under the table to help get by.

It also ignores the reality of where the money for these government benefits is actually coming from. It either has to be extracted from the productive economy in the form of taxes or it has to be borrowed. If it’s the former, it means less money is available in the private sector to, say, invest and create jobs. If the latter, then it adds more debt to the economy, which may not be the most practical solution if the problem is too much government debt in the first place, crowding out private investment and hindering growth.

Seriously, at what point does even the sheep-like herd of White House correspondents rise from their supine positions and tell Mr. Carney that some arguments are too stupid to be presented to their readers with a straight face?

~
Dale Franks
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19 Responses to And after that, let’s raise the minimum wage to $100/hr

  • He’s not saying that unemployment benefits will create more growth than jobs. He’s saying they’ll create more growth than if the unemployed don’t have any benefits at all. That is not “puzzling”. It’s debatable, certainly, because the money for the benefits has to come from somewhere, somehow. But it’s not “puzzling”, unless you hunt strawmen for a living.

    A. People dependent on the charity of family or friends spend virtually nothing. B. People on unemployment spend a bit more. C. People with jobs spend even more than that. Carney says B involves more consumer spending than A. There’s nothing mysterious about that. Now, it happens that he’s too f*****g stupid to know where the money comes from, of course, or to understand that any of this might have any other effects at all. He thinks it happens in a vacuum: Money magically appears, dot-dot-dot, profit! So he’s a moron. But he’s a different moron than the one you descsribe.
     

    • No. He isn’t.  He says the unemployment spending “creates growth and income for businesses that leads them to decisions about jobs, more hiring”. It does no such thing.  At best, it may prevent economic contractions and second order layoff effects from getting even worse. But businesses still have less growth and less income than they have when the jobless are employed.

      That’s not the argument Mr. Carney made, however, unless by “growth” he actually meant “slightly less severe contraction”.

      • I said it twice, in the hope that one or the other would get through.

        Neither did.

        Oh, well.
         

        • He’s saying they’ll create more growth than if the unemployed don’t have any benefits at all…I said it twice, in the hope that one or the other would get through.

          *shrug*
          You can say it a thousand more times, and it still won’t matter. Because, it’s just wrong. It doesn’t create “growth” at all. It merely ameliorates the decline.
          What part of that are you not getting?
           

        • “Mr. Carney attributed miraculous qualities to these government handouts, saying “every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring.”

          Added business, creates growth, more hiring – all imply growth, not status quo.

          Had he stuck with their stock BS phrase about jobs saved it would be at least semi realistic in this case.

          • Nay, nay…  At best it would be a consistent delusion.  And we could imagine how the Captain of Titanic would feel about one of those…

        • Here – further proof the Administration thinks this is growth, not just maintaining the status quo:

          “Obama’s Secretary of Agriculture Tom Vilsack: “Well, obviously, it’s putting people to work. Which is why we’re going to have some interesting things in the course of the forum this morning. Later this morning, we’re going have a press conference with Secretary Mavis and Secretary Chu to announce something that’s never happened in this country — something that we think is exciting in terms of job growth. I should point out, when you talk about the SNAP program or the foot stamp program, you have to recognize that it’s also an economic stimulus. Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity. If people are able to buy a little more in the grocery store, someone has to stock it, package it, shelve it, process it, ship it. All of those are jobs. It’s the most direct stimulus you can get in the economy during these tough times.”"

          • Furthermore I don’t see why they don’t take advantage of the magical multiplier where $1.00 of their spending turns into $1.84 in terms of economic activity and spend 5 times as much to get 5 times as much growth.

            Because, you know, there’s no cost associated with every $1.00 they spend, that’s freeeeeeeeeeeee.

    • People dependent on the charity of family or friends spend virtually nothing.

      Where is your support for that?????

  • So now bank robbery is economic growth! … as long as i spend the money.

  • SIGH!!! The elite unaware of the Broken Window Fallacy.

    • But, wait, isn’t Obama on the very other hand claiming that bad weather set the economy BACK?  Now unemployment helps not just moving it, but moving it forward?

      Think of all the shovel ready jobs we can have if the Air Force randomly carpet bombs large segments of major cities – we’ll need more firemen, more police, more doctors, more nurses, more renovation crews (I blanket assume, both the hauling away of debris and the rebuilding), more mortuary services, more emergency aid workers bringing in supplies, more orders FOR necessities such as food, clothing, water, and finally of course, we’ll need more fuel and bombs for the bombers to drop!

      EVERYBODY WINS!!!! ECONOMIC GROWTH!  GOOD TIMES!!!!! (well, unless you happen to be in the path of the carpet bombing, and then, it’s gonna suck big time….so, let’s make sure we nail primarily Republican voting precincts)

  • The Times decides that the “little people” should be taxed more too, just a year later.

    Letting all of the cuts expire at the end of 2012 would save $3.8 trillion over the next decade. Letting the tax cuts expire for those making more than $250,000 would save $700 billion. That would make a real dent in the $2.4 trillion in total deficit reduction envisioned in the debt limit deal. A sensible and fair approach would be to let the high-end tax cuts expire as scheduled, but keep the other tax cuts for another year.

  • But to believe Mr. Carney, one must believe that larger numbers of people receiving and spending substantially less money creates more economic growth. This is magical thinking. If it were true, the obvious solution would be to completely shut down the productive economy, and provide every inhabitant with a government dole check. No doubt economic growth would explode if Mr. Carney were correct, although who would then be available to fill the millions of new jobs is quite beyond me.

     

    It is “magical thinking”, but it’s not new.  I wrote something very similar last year (in a post called .. “Magical Thinking“!):

    How, exactly, do food stamps and unemployment benefits create jobs? Arguably, spending on infrastructure could create construction jobs on a temporary basis, although that hasn’t proven to be the case with the stimulus bill that was passed. But there is simply no logic to the idea that providing government benefits to the poor and unemployed will serve to create jobs, much less 9 to 10 million of them. That’s just magical thinking.

    [...]

    Whatever the virtues of income support, and even if that support will be quickly spent in the economy, there is no justification for concluding that it will expand the economy. At best, it can stabilize a downturn by maintaining some level of consumer spending. But that does not expand the economy in any way, shape or form, and it certainly doesn’t create jobs an unprecedented level as suggested by Rosenberg.

    Indeed, in order to give money to the poor and jobless, the government has to take money fr0m someplace else. Since it doesn’t create anything, the government will either (i) tax those who are working and creating wealth at higher rates, (ii) borrow money, or (iii) print money. Again, these are not wealth producing actions, but instead wealth destroying ones. It is true that, assuming such income support shortens a downturn, tax receipts will eventually outpace the costs of funding those supports. What is not true is that the government benefits will create jobs.

    • Yeah. That’s ’cause I just re-wrote your post.

      • Wow, that sort of makes you a Weird Al Yankovich to my Michael Jackson … I’m not exactly sure who gets the worse end of that deal.

      • My boy I’d say you had potential for a job at the New York Times in a high paying job.

        You keep either making stuff up, or ‘liberating’ other people’s unattributed work, and the sky is the limit!  yessiree!

        Wait……is that your real picture?

        • It’s his non-threatening “poet pose” … you just can’t see that he’s sitting on a K1600GT with several snarling beasts at heel, waiting to be unleashed on doomed victims upon Dale’s command.