Unemployment Insurance Saves Jobs, Stimulates Economy(that phony 2-1 multiplier again) )

"...it is estimated that every dollar spent on jobless benefits has the effect of $2 spent in the economy."

If that's the case, then every tax dollar stolen from those that earned it has the effect of $4 removed from the economy.

Actually, you might have an interesting point by the tail there. Specifically, since unemployment benefits are subject to the income tax, it stands to reason, if every dollar of unemployment benefits distributed to an individual generates $2 of value in the economy, that removing that one dollar from the economy through the income tax deprives the economy of $2 of economic value. However, in terms of dollars that are taken through taxation, there is no real difference between a dollar taken from one person's unemployment benefits and a dollar taken from another person's wages. Since there is no difference between those two dollars, it necessarily follows that taking one dollar of wages (or any other compensation or earnings) from the economy through taxation also removes $2 of economic value from the economy.

Thus, at best, unemployment compensation is a zero-sum game (that is, it cannot have a net positive effect on the economy). When the non-economic transaction costs and losses (essentially, the governmental equivalent of so-called "economic rents") are taken into account, the net effect of taxing a dollar to distribute a dollar of unemployment has a net negative effect on the economy.

The liberals' next argument would be - well, then that's why we borrow and deficit spend, since that means we're not taking a dollar out of the economy, we must be providing a net positive effect.

That, of course, is false because (a) borrowing must be repaid, and (b) debt carries interest costs. Thus, because the non-economic losses that result from putting the government into the equation means that it is impossible to pass a dollar of value through the government's maw untouched, less than one dollar of value is passed on for every dollar borrowed. When that cost is taken into account, along with the interest expense incurred, the net present value of the payment stream necessary to service and repay that new debt also ends up being greater than the economic benefit provided by the distribution of unemployment benefits today, which means that, again, unemployment benefits have a net negative effect on the economy.

Of course, just because there is a negative effect does not mean that we should simply get rid of unemployment benefits altogether; however, it does mean that they have to be strictly limited and not used as a covert means of slowing turning the economy into a socialist dystopia (which, in the fullness of time, will inevitably turn into a fascist hell).

Obama the Grinch

While the exact amounts in the story below may not be right, the moral of the story is true.

Remove $2 from the pocket of a taxpayer. Taxpayer does not spend $2.

Pass it through government bureaucracy (Fed Gov collects money, Fed Gov distributes money to states, State Gov receives money, State Gov distributes money to unemployed). Cost of bureaucracy: $1? Bureaucrats pay union dues: 2 cents. Bureaucrats spend 98 cents.

Union leaders spend 1 cent on themselves, 1 cent on politicians’ campaign funds for continued support for unemployement insurance.

Unemployed person receives $1. Unemployed person spends $1.

Economy “grows” by $2 for $1 in unemployment benefits!

Who lost?

Taxpayer lost $2.
Employers who have to pay high wages to compete with paid govt vacation (unemp ins), and who therefore cannot expand their businesses.

Who won?

Bureaucrats: 98 cents
Union leaders: 1 cent (for every unemployment dollar)
Politicians: 1 cent (for every unemployment dollar)
Unemployed person living with his relatives and not needing to look for a job: $1.

They all thank you very much, Mr. Taxpayer.

The only way this math is not true is if the Fed Gov prints money or borrows it to pay for some of the original $2 collected from the taxpayer.

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