I'm sorry,

[Jeff Young]

I would suggest my answer (and that of Paul Krugman, a Nobel winning economist) is the more sophisticated of the two, but bet that as it may.......

1. I absolutely agree spending needs to be curtailed. But it's not spending on unemployment benefits that is causing the problem.

2. You analysis of the stimulus effect of the multiplier is just flat wrong. Spending above baseline? The baseline for an unemployed person is ZERO. Unemployment benefits get spent immediatley on necessities, goods and services that jobs are either preserved or created to produce.

I do agree that this is not a means to an end in and of itself. Obviously, this is a band aid to keep the economy going, and people off the streets, until the economy rights itself.

You should spend a few minutes watching the Krugman video. It will help.

Jeff, your answer while simplistic, misses the point. The administration's efforts are neither scalable nor sustainable.
The government doesn't create wealth, it only redistributes it. Unfortunately they are funding their efforts by simply printing more money. Look at where your economic theories are applied on a grand scale Greece??? California??? New York?? Your solutions suggest that the national economy can somehow prosper with spending and no cost cutting. Let's just print money, hand it out and the " multiplier effect" will allow everyone to prosper. You forget one BIG THING... THERE IS NO VALUE ADDED!!!!!!
The value add is what creates the multiplier.

A friend named Tom White recently wrote this:
"The fatal flaw in Pelosi’s reasoning is the incorrect belief that unemployment checks stimulate. While she is correct that the money is quickly spent, which is the basic and necessary requirement of any government effort to stimulate the economy with free money, she also states the money “is needed for families to survive, and it is spent”. That much is true, however, a stimulus must be over and above the minimum spending required for survival. Otherwise it is merely basic sustenance, not stimulus.

A stimulus, by definition, creates spending above the baseline. An economy in decline, as we now have, requires stimulation over and above the baseline.

Any family surviving on unemployment is spending less than when employed. There is no discretionary spending, only basic survival. There are no visits to restaurants, no home beautification projects to keep jobs at Home Depot, no extras. Period.

Unemployment Insurance is Insurance

Unemployment insurance is insurance. The purpose of insurance is to indemnify, or make whole. The objective of any type of insurance is never to leave you “better off”, but to leave you the same. Unemployment Insurance fails miserably at indemnification. It will not even come close to replacing your income, let alone benefits. You will always be far worse off. (And this is a prime example of why government “single payer” health care is a BAD idea.)

If your auto insurance company decided to replace your brand new BMW, which you totaled, with a 1995 BMW, you are not indemnified. You are screwed.

But this is exactly how government provided unemployment insurance works. Except in most cases the BMW is replaced with an old bicycle.

The net effect of unemployment spending when compared to “employed” spending is a vast decrease in money flowing out.

What we see with so many people trying to make ends meet on unemployment is a sharp upswing in foreclosures, more people living without insurance (of any kind), and businesses are seeing a drop in sales.

No one is actually seeing a recovery where it counts – in their pocketbooks."

And yes, she's an idiot...

 

[Pete McCluskey.]

Keith, it is worth visiting the paddock just to read your post's. Now I know you are a Journalist I wont hold it against you....well maybe a little bit.:laugh:

 

[domtoni]

Jim,

Comment from a friend in commercial real-estate:

I do think it San Jose, Santa Clara, Palo Alto and the high end
neighborhoods that support them are holding it's own compared to other
areas.
Apple is still there. That's big. They are the big dog in innovation and
hire and absorb a lot of companies for their arsenal.
The home prices have not discounted much, so far. At little more so on the
outlining areas, like the coast. Where I am at. In Santa Cruz.
Prices here have softened a little.
Also, there is activity in leasing but the prices are pretty soft.
The buildings are not getting the returns originally promised. But low
vacancy seems to be assured. There is not much land left for expansion that
is not already owned. Institutionally, a 4-5% cash for cash return.

Comment from a friend whose husband sold a technology business, and she imports products from Europe:

Hi booming would be good, but real estate is slow now due to first time buyer program halt. We have the biomedical industry here which is very big and of course the semiconductor industry, problem has been getting parts we need from china as they stopped production and were shipping from inventory ( as per my engineer son who is in semiconductor sales).

Her phone begins with 408

 

[Pat]

You should spend a few minutes watching the Krugman video. It will help.[/QUOTE]

Well Jeff, if you were right, the Obama stimulus would have prevented the unemployment rate from going over 8% now wouldn't it??? Europe wouldn’t be having a crisis with the Euro and reducing spending, CA and NY would be economic miracles.

Krugman has a Noble Prize, just like Obama, so I'm not into drinking his cool aid.
He got the Nobel award for postulating that consumers like variety in what they consume. For the same price, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products.
This is a blinding flash of the obvious certainly backed by years of research.
Brilliant, he writes this and get an award, Sam Walton DOES it a generation earlier and is a billionaire…

Krugman is also a partisan hack for the democrats and is the left's answer to Rush Limbaugh. (In an ego contest, I'm not sure whose would be bigger).
But if this guy is your hands down expert on unemployment pay's role in economic stimulation, here’s what he wrote on page 210 of his jointly authored textbook (with his wife Robin Wells) Macroeconomics (2nd ed.), published in 2009:

“Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.”

Seems like the two of you aren't quite on the same page...

As others have suggested, perhaps you would benefit from broadening your data sources and examining what's going on around you. Visit Greece, Zimbabwe, Venezuela...

 

[Ron Earp]

Krugman authored textbook (with his wife Robin Wells) Macroeconomics (2nd ed.), published in 2009:

“Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.”
​

Many of my German friends believe that the extended unemployment benefits are a problem and halfheartedly wish their system was more like ours. Of course, these friends of mine have jobs. I'm not sure what the true picture is in Europe but since we're on a very international forum I'm certain that some of our European members could fill us in.

R

 

[domtoni]

Unemployment in the UK is something like this:
- Sterling 65/week for 6 months gross and taxable
- NHS contributions are paid
- no payment for perscriptions
- free vision tests (discounted price for eyeglasses)
- no dental charges if using an NHS and NHS prescriptions are followed
- one can work up to 16 hours week without coming off unemployment
- and if one has no savings and owns a house, council tax (similar to property tax except paid by the person rather than the house owner) can be discounted
- and a whole slew of other benefits if one qualifies

The real problem here, as I have said before in a number of different posts, is that the old Labour Government did nothing to create new job opportunities. The new government has been in place for only 2 months now, and other changes they have noted, actually make sense.

In Italy, the country has something called Casa Integrazione, and that effectively means that the Govt. will pay you up to 2 years at around 90% of your salary. Jobs in Italy are difficult to find, so people fight to keep them, but they also don't want to give up their rights, payments etc.

 

[Garry]

I have to agree wuth Jeff on the unemployment spending. I am for fiscal conservatism, and it is true that unemployment subsidies are detrimental to people looking for work when the economy has reached full or almost full employment. But, with five people applying for every one job in the US, then some form of sustinance makes sense. After all, our economy is based upon 80% of the total employment in service jobs...retail, food services, grocery,construction,etc. If there is no money flowing into the economy from anywhere, then where do these jobs grow from? It is also a faster stimulus to a service-based economy to offer unemployment insurance (or welfare) than infrastructure projects which take a very long time to plan and implement.
I am in no way advocating this as a long-term solution and Krugman doesn't either. It's the right attitude to want to clean up the government mess of Pork spending that has been the norm for over 50 years. Let's start with that, but it is myopic to look at 20 or 30 billion dollars that we spend in employment welfare as the solution to all of the other areas that need trimming. I ask you, would you have rather seen the Governments of the western world spend 100's of Billions to bail out elitist bankers and their criminal actions to the steal wealth of savings in pensions, homeowners, and savings accounts or would we have been better off putting that money directly to every single citizen and letting the chips fall where they may? Sadly, we will never know. For my money, give me the cash and I will determine what I do with it. Can anyone doubt that a lot of Credit Card debt would have been paid off, which would have stregthened the banks and forced them to lower borrrowing costs to consumers without the Consumer Protection Law as it was hobbled together. Some would have opted to pay off home mortgages to ensure they would avoid foreclosure and that would have sustained home values.
Instead, what happened was the wholesale robbing of the American Dream and the American/European citizen and his investments.
Unemployment Welfare makes sense sometimes when certain conditions exist, and the current state of affairs warrant this action. I would rather have some guy on the dole for a year or two paying his rent, and feeding his family while looking for a decent job, than to have him homeless, starving, and destroying his family unit.


By the way, I like Krugman, but a social commentator, not as an economist. He's little marxist for my taste.
Garry

 

[Jim Craik]

Domtoni,

Your friends comments about real estate in my area are fairly accurate. Although they are quoting mostly commercial data and my comments were about residential data as that is what I follow.

Just to give you some idea about this area, the data below is taken from DataQuick data, year to date:

Lower San Mateo County
Atherton: +17.2%
Buirlingame: +6.9%
Half Moon Bay: +14%
Menlo Park: +13.4%
Millbrae: +16.5%
San Mateo: +33.4%

Northern Santa Clara County
Cupertino: +2.3%
Campbell: +21.5%
Los Altos: +10%
Los Gatos: +14.4%
Milpitas: +20.8%

Now, no area is up compared to 2007-8 and not all neighborhoods are showing increases, but as a whole, residential, median values in this area are up.

 

[domtoni]

Wow, wish my house in Park Ridge was where you are. I am sure house values are up this year over last but still a long way down from where we were in 2006.

Thanks

 

[Nick]

Many of my German friends believe that the extended unemployment benefits are a problem and halfheartedly wish their system was more like ours. Of course, these friends of mine have jobs. I'm not sure what the true picture is in Europe but since we're on a very international forum I'm certain that some of our European members could fill us in.

R

Ron,

I was unemployed for 6 months in 2001, my wife at the time had a full time job earning around £25,000. My unemployment pay was £68 a week.

My son was unemployed this year 2010 he is 21 his unemployment pay was around £40 a week. He has a part time work as soon as his hours went over 15 hours his unemployment benefit was stopped and he had to reaply.

This got so difficult and onerous he stopped applying for it.

 

[domtoni]

Found this summary of total unemployment from literally 1950 to present:
Where can I find the unemployment rate for previous years?

Then there is this more recent chart and unemployment under the democratic congress, and again using the Dept. of Labor Statistics.
A chart of unemployment since 1995 | RedState

The question is :
How do we get unemployment down? Stimulus didn't work.

This is from Arthur B. Laffer:

No one opposes unemployment benefits as a transition aid for people to get back on their feet and find a new job. Unemployment benefits are a safeguard for individuals down on their luck. But to argue that unemployment benefits actually reduce unemployment is disingenuous at best, and could induce our government to enact policies that have the effect of destroying our nation's production base from whence all benefits ultimately flow, says Arthur B. Laffer, chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let It Happen."

According to Laffer:

Any government program that would reduce unemployment has to make working more attractive for both employer and employee.
Since late 2007 the federal government has spent somewhere around $3.6 trillion to stimulate the economy.
He recommends:

The government should have taken all $3.6 trillion and declared a federal tax holiday for 18 months.
With no income tax, corporate profits tax, capital gains tax, estate tax, payroll tax (FICA) either employee or employer, Medicare or Medicaid taxes, federal excise taxes, tariffs or federal taxes at all, federal revenues would have been reduced by $2.4 trillion annually.
This would have resulted in a 2.5 percent unemployment rate.
Source: Arthur B. Laffer, "Unemployment Benefits Aren't Stimulus," Wall Street Journal, July 8, 2010.

 

[David Morton]

Looking at all this from the outside, and listening to you gentlemen I get the feeling
that the American Dream was just that - a dream. Your economy is as volatile as any other, your employment rates are as bad as any here in Europe, you are trying to fight a war nobody can win, your president could turn out to be as useless as our last prime minister in the UK, your country is becoming more and more dependant on cheap imported goods from China, and above all you're government doesn't seem to have any real plans on how to extricate you all from any or part of this mess. You might dislike what I am saying but it is my perception looking from the outside in.

 

[domtoni]

Lastly, the BBC reported last night that the IMF told Obama to curtail spending. His response: to come out of the recession, we need more spending.

Interesting interview with the head of MRI out of Sacramento:
http://video.foxnews.com/v/4276350/job-recruits-choosing-unemployment

 

[Garry]

"Looking at all this from the outside, and listening to you gentlemen I get the feeling
that the American Dream was just that - a dream. Your economy is as volatile as any other, your employment rates are as bad as any here in Europe, you are trying to fight a war nobody can win, your president could turn out to be as useless as our last prime minister in the UK, your country is becoming more and more dependant on cheap imported goods from China, and above all you're government doesn't seem to have any real plans on how to extricate you all from any or part of this mess. You might dislike what I am saying but it is my perception looking from the outside in.<!-- google_ad_section_end --> "

+1 David!.
Garry

 

[Jack]

I'm afraid that your observation is pretty accurate David! I sincerely hope that in November, the tide will change enough to repeal some of the nonsense and move forward. The fear is perhaps it will be too late..

 

[Keith]

Looking at all this from the outside, and listening to you gentlemen I get the feeling
that the American Dream was just that - a dream. Your economy is as volatile as any other, your employment rates are as bad as any here in Europe, you are trying to fight a war nobody can win, your president could turn out to be as useless as our last prime minister in the UK, your country is becoming more and more dependant on cheap imported goods from China, and above all you're government doesn't seem to have any real plans on how to extricate you all from any or part of this mess. You might dislike what I am saying but it is my perception looking from the outside in.

You really believe that David? Only I saw today that our new defence policy is to "trim the armed forces" (again) and "rely on our allies" I suppose meaning USA, or are the Europeans our Allies? I'm a bit confused here because it's a bit of a toss up who despises us most now that Russia the US and China are deepthroating each other.


PS, saw our Airforce today - the Typhoon flew over my house and you would have been proud David. It looked very very good- do they have any plans to build another one or has that been axed too? I hear they've already scrapped our 2 new Fleet Carriers and the Daring Class might only reach single figures.

If it's as bad as that, then who WILL defend us? :uneasy:

 

[domtoni]

David, your comments are right on accurate.

As I said earlier in this or in another thread, BHO has adopted the Gordon Brown strategy. I am not saying that from my observations, but from a BBC World Service TV program aired at 2200 UK time probably shortly after the inauguration. This Univ. of Maryland or Virginia professor said that BHO was adopting the British Labour Party platform. For my opinion, if you guys want to see the future, look at Britain today.

And yes David, the American Dream has been put out of business

 

[Pete McCluskey.]

Looking at all this from the outside, and listening to you gentlemen I get the feeling
that the American Dream was just that - a dream. Your economy is as volatile as any other, your employment rates are as bad as any here in Europe, you are trying to fight a war nobody can win, your president could turn out to be as useless as our last prime minister in the UK, your country is becoming more and more dependant on cheap imported goods from China, and above all you're government doesn't seem to have any real plans on how to extricate you all from any or part of this mess. You might dislike what I am saying but it is my perception looking from the outside in.

My perceptoin too. Sadly.

 

[Mike Christian]

Looking at all this from the outside, and listening to you gentlemen I get the feeling
that the American Dream was just that - a dream.

Yes, I suppose, if I listen to all the negative information I can come to the same conclusion. I, however, am an optimist. The beauty of this country is that there is always opportunity. All it takes is some effort to find.

I find that people can either sit back, bitch/moan about the past and present, or they can focus on the future and move forward. Personally I chose the latter. Nothing in this world is a constant (except death) - one has to remain flexible and adaptive.

This mindset has served me very well. The American dream is alive and well in my part of the world.

Mike

 

[Jim Craik]

Mine too