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Do Unemployment Benefits Stimulate the Economy?
Mackinac Center for Public Policy ^ | 7/19/2010 | Jarrett Skorup

Posted on 07/20/2010 5:47:29 AM PDT by MichCapCon

With the expected appointment of an interim Senator in West Virginia, Democrats in Washington are hoping to push through an extension on unemployment benefits. Under current law, benefits run out after 99 weeks (up from a previous record high of 65 weeks in 1975).

There's valid argument that a compassionate society with a dynamic economy should provide unemployment benefits, and a legitimate debate regarding how much and how long. But recently, some have gone beyond this and argued not only that these benefits are necessary, but that they actually stimulate the economy.

Most notably, White House Economist Lawrence Summers claims that not extending the unemployment benefit beyond almost two years would cost the U.S. economy $10 billion and 100,000 jobs.

Some center-left economists have calculated that Michigan will miss out on $205.6 million in "economic stimulus." And columnist Jackie Headapohl writes on Mlive.com that, "Unemployment insurance puts money in the pockets of the families most likely to spend the money — which in turn expands the economy and creates jobs."

So is this accurate? Does government money in the form of unemployment benefits expand the economy?

(Excerpt) Read more at mackinac.org ...


TOPICS: Business/Economy; Constitution/Conservatism; Government; News/Current Events
KEYWORDS: michigan; obama; unemployment
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To: Tolsti2

the time I was working dangerously was 1978 after graduating HS to 1984 after graduating college.

U.I after the 26 weeks is no longer a safety net, but becomes nothing more than welfare issued by a different agency.

More to the point is that every dime that is taken in taxes is less that I have to either spend or save. If I were to save it, I could acquire a nest egg large enough to provide a return such that I have no need to work further, thus freeing up my position in the labor force to someone else.

Remember income taxes are a tax on the acquisition of wealth. As rates grow for the higher earners they must keep working. Which is the whole point. Keep the motivated busy trying to earn a living and the “citizen legislators” envisioned by the founders give way to the professional politician like Chuck Schumer.

The integrity of the citizen legislator is that it is hard to bribe a man who is independently wealthy. What can you give him that he does not already have or have the means to purchase if he desired it?

This is leads to extensions of U.I. by hte professional politician, shopping for votes as opposed to the principled citizen legislator do the right thing in trying preserve the liberties and property of his constituents.


41 posted on 07/20/2010 8:15:22 AM PDT by Ouderkirk (Democrats...the party of Slavery, Segregation, Sodomy, and Sedition)
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To: dfwgator
"Unemployment benefits just allows the government to avoid trying to solve the problem, and it keeps the sheeple happy for awhile, they know if they stopped the benefits, they would storm the gates."

Sooo...apparently, anyone that is unemployed is considered "sheeple'?

I'll ask you also. What do you do for a living and how old are you?

42 posted on 07/20/2010 8:19:39 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: XenaLee
Your tirade is misdirected, but that's not entirely your fault since you are not fully aware of my circumstances or the position from which I made my earlier comments.

I AM one of the long-term unemployed myself. I lost my former 6-figure, 20-year IT career last fall and have not been able to get another job in the field at all. I very easily could have been one of unemployed you speak of who has lost everything, but I saw all this coming last year before I actually got canned and my family took steps to prepare and get the situation under control before we got buried.

We started early working to eradicate all debt - no credit cards, car payments, etc. My wife went back to work and we sold our overpriced suburban McMansion last summer into the declining market, but thanks to the flaming hoops we were willing to jump through in order to get and keep a buyer, we got it sold and came out of it with some cash in hand.

I also completely cashed-out my 401k after getting laid-off and did the only rational thing I could do with it: used all of it as a huge downpayment on a much smaller house in a less expensive town. So now I'm in my 40s with no retirement savings whatsoever, but at least we have a place to live with a mortgage that is now is smaller than the SECOND mortgage on our previous house.

I've also gone back to school at an inexpensive community college to retrain to do something else, worked my butt off to ace my classes and put the young kids to shame, and am now very close to landing a job. Yes, if get lucky I'll be making A FIFTH of what I used to make before my layoff, but we've endured the sacrifices and altered our lifestyles to where we'll still be secure.

So yeah, I can legitimately claim that unemployment IS a disincentive to find work. I was getting more from my UI benefit than I'll be making when I go back to work - what would you do in this situation?

43 posted on 07/20/2010 8:19:52 AM PDT by Zeddicus
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To: Zeddicus

The only people who are making a big deal out of this is the news media.


44 posted on 07/20/2010 8:22:27 AM PDT by sportutegrl
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To: XenaLee
I'll ask you also. What do you do for a living and how old are you?

None of your damn business.

My point was that the government is not motivated to do anything about the economy as long as they can simply keep transferring money from the producers, instead actually trying to address the underlying structural problems of the economy.

45 posted on 07/20/2010 8:24:37 AM PDT by dfwgator
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To: MichCapCon

Bring back jobs if you want a recovery. Unemployment won’t do squat for the economy. I know first hand how it works. My husband was off for 6 months and it paid a lot less then what he could make working. So all we paid were essentials which leaves nothing to spend on anything else. And that does absolutely nothing for the local economy.


46 posted on 07/20/2010 8:31:00 AM PDT by linn37 ( "The problem with socialism is that you eventually run out of other peoples money.)
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To: Zeddicus

That’s nice that you were able to manage the situation. Of course, you had the benefit of a spouse’s income, plus you had a savings plan. People that are unmarried don’t have that option or other salary to fall back on. It’s also less likely that they have enough savings to live on. But that’s not even the point here.

The point is...you claim that receiving unemployment benefits disincentivizes people (meaning ‘other’s...not you) to look for and find work. You also fail to understand the plight of those ‘others’ when they may not have another spouse’s income to rely on, while you make only 1/5 of what you’re used to making.

Here’s a clue....IF you could get hired for a job making 1/5 of your former salary, it wouldn’t be enough to live on. The chances of even getting that job are slim to none, since the employment application usually asks how much you made at your last position and if you are honest, they won’t hire you. They’ll figure you’ll bolt as soon as you find something better (rightly so). If you lie and say you made less, and they check, you won’t get the job.

Now...unless you made $100,000 a year, 1/5 is not going to be enough to live on. I only made $50,000 a year. 1/5 of that would barely just pay my rent. Even at $70,000 a year, 1/5 of that would only be about $1,200/month. Great if you have another income to fall back on, or if you’re living with mommy, but not so great if you’re on your own. Get the picture?

I’ll say it again. In normal times, these claims would be valid. These are, as you already know, not normal times. The fact that you’d even have to consider taking a job making 1/5 of your normal salary attests to that fact. Between the number of applicants per job, the overqualification and previous salary factor and the age discrimination factor for those of us over 50, it’s a bleeding nightmare out there. And it’s getting worse, not better.

All I’m saying is....stop and think about others that are not so fortunate as you are before you make blanket statements that, even if you didn’t intend to, condemn those of us that are still unemployed through no fault of our own.

Be a compassionate conservative...not just the faux cliche that the left throws out there and uses against us due to our fiscal conservative policies.


47 posted on 07/20/2010 8:45:40 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: XenaLee
You’re not in the real world, John. That much is obvious. Out of curiosity, what do you do for a living and how old are you?

What do you consider living in the REALworld? One where everybody expects the gov't to take care of them from cradle to grave? If so no I do not. I am 57 and I have worked from the time I was about 12 delivering papers. Then I moved on to working in a grocery store. I went into the military during Viet Nam. I then worked in, managed and eventually owned a restaurant. Due to an over abundance of restaurants in the area I was forced to close. I went back to school. while in school I worked at a convenience store, installed siding, layed block and bricks. I did anything and everything I could. I now have a job at a very liberal establishment, which would probably frown upon me arguing with another liberal so I will not mention it.
48 posted on 07/20/2010 8:53:19 AM PDT by John D
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To: dfwgator
"None of your damn business.

My point was that the government is not motivated to do anything about the economy as long as they can simply keep transferring money from the producers, instead actually trying to address the underlying structural problems of the economy."

Your point is valid.... except that... these are not normal circumstances. You and I both know the government is "disincentivized" (there's that word again) to do anything about the economy as long as it can grab power from the current disaster we're in.

But my post was addressing those that claim the unemployed don't have an incentive to find work as long as they are receiving unemployment benefits...which is just not true.

Retired, over 65 and on social security, eh?

49 posted on 07/20/2010 8:58:27 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: XenaLee
Your point is valid.... except that... these are not normal circumstances.

Oh please get some perspective, this country has been through this many times, ever heard of the Great Depression? It was in all the papers.

50 posted on 07/20/2010 9:00:23 AM PDT by dfwgator
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To: MichCapCon
Does government money in the form of unemployment benefits expand the economy?

No. In my best Walter Williams voice:

I am employed now. I pay bills, mortgage, eat, utilities, entertainment, etc.

Now, I'm unemployed receiving unemployment benefits. I eat.

Unemployment benefits do not expand the economy. Actually, considering government debt, and interest payments, unemployment benefits contract the economy.

5.56mm

51 posted on 07/20/2010 9:11:34 AM PDT by M Kehoe
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To: MichCapCon
Economics lesson:

1.The private sector is the productive sector of the economy.

2. The government (public) sector is the non-productive sector of the economy.

Taking money from the productive sector and spending it in the non-productive sector diminishes economic growth.

52 posted on 07/20/2010 9:17:14 AM PDT by CharacterCounts (November 4, 2008 - the day America drank the Kool-Aid)
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To: John D

Ok. So you’re 57 and currently employed... emphasis on ‘currently’. So I take it that your stance is...if you are laid off due to the economy, you’ll refuse to file for unemployment benefits. Right?

I’m over 50 and have worked since I was 16. And until now...I had never been dependent upon the federal government. But, since... due to the DemocRat-created economy...the state is out of funds for unemployment benefits, which doesn’t happen to be my fault...I am now.

And for the record...I’m a conservative, not a liberal. In fact, I’m so far right, I’d probably make YOU look like a liberal.


53 posted on 07/20/2010 9:18:12 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: dfwgator
"Oh please get some perspective, this country has been through this many times, ever heard of the Great Depression? It was in all the papers."

Your comment and sarcasm is laughable...since...I wasn't even born back then. So how, pray tell, could I possibly have perspective related to the Great Depression? Are you, perhaps, admitting that the situation we're currently in compares to that era? If so, you're making my point for me.

Thanks.

54 posted on 07/20/2010 9:25:47 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: XenaLee

The point is there is never a “normal” time, there are good periods, there are bad periods, it will continue to be until the end of time.


55 posted on 07/20/2010 9:33:36 AM PDT by dfwgator
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To: dfwgator

That’s true.


56 posted on 07/20/2010 9:38:54 AM PDT by XenaLee (The only good commie is a dead commie.)
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To: XenaLee
XenaLee, I understand completely that these are not "normal" times (or perhaps they are, and the previous couple decades of false prosperity were the aberration), which is exactly why I have take extraordinary measures and have done things I never dreamed I'd have to do, in order to keep food on the table and a roof over our heads.

But what's the answer then? Are you suggesting that the Federal government just keep subsidizing unemployment extensions forever, given that the economy will never return to the previous levels of debt and bubble-driven faux prosperity?

57 posted on 07/20/2010 10:29:26 AM PDT by Zeddicus
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To: Ouderkirk

Silly goose, my venture capitalist recognizes that he is going to make good money off our hard work. That is hardly a handout.

As for you paying our way, that is complete and utter bunk. We’ve worked all of our lives as well, paying more than our fair share of taxes and are now paying more than our fair share again, except now I’m grateful to be paying. The $18K we were paid over 60 weeks is a drop in the bucket in comparison to all the taxes we have paid over the years (not to mention all that has been given to charity).

As for sleeping in cars, we did our share of that as well last year.

As for your just deserts, I wasn’t talking about the here and now. ;) Greed, pride, wrath, and envy... just to hit a few.


58 posted on 07/20/2010 10:53:30 AM PDT by publana (Time to go Galt.)
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To: XenaLee

Bravo. I laugh at the first reply to you. You just explained that there are no jobs. The answer? GET AHHHH JOB YA BUM!


59 posted on 07/20/2010 10:56:08 AM PDT by Tolsti2
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To: XenaLee
And for the record...I’m a conservative, not a liberal.

Conservatives make it on their own, no matter how tough it gets. Liberals look to the gov’t for handouts whenever it gets tough. Which are you?
60 posted on 07/20/2010 10:57:00 AM PDT by John D
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