Six years have passed since the United States economy entered the Great Recession, four and a half since it officially began to recover, but long-term unemployment remains disastrously high. And Republicans have a theory about why this is happening. Their theory is, as it happens, completely wrong. But they’re sticking to it — and as a result, 1.3 million American workers, many of them in desperate financial straits, are set to lose unemployment benefits at the end of December.
Now, the G.O.P.’s desire to punish the unemployed doesn’t arise solely from bad economics; it’s part of a general pattern of afflicting the afflicted while comforting the comfortable (no to food stamps, yes to farm subsidies). But ideas do matter — as John Maynard Keynes famously wrote, they are “dangerous for good or evil.” And the case of unemployment benefits is an especially clear example of superficially plausible but wrong economic ideas being dangerous for evil.
Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
Correspondingly, the G.O.P. answer to the problem of long-term unemployment is to increase the pain of the long-term unemployed: Cut off their benefits, and they’ll go out and find jobs. How, exactly, will they find jobs when there are three times as many job-seekers as job vacancies? Details, details.
Proponents of this story like to cite academic research — some of it from Democratic-leaning economists — that seemingly confirms the idea that unemployment insurance causes unemployment. They’re not equally fond of pointing out that this research is two or more decades old, has not stood the test of time, and is irrelevant in any case given our current economic situation.
The view of most labor economists now is that unemployment benefits have only a modest negative effect on job search — and in today’s economy have no negative effect at all on overall employment. On the contrary, unemployment benefits help create jobs, and cutting those benefits would depress the economy as a whole.
Ask yourself how, exactly, ending unemployment benefits would create more jobs. It’s true that some of the currently unemployed, finding themselves even more desperate than before, might manage to snatch jobs away from those who currently have them. But what would give businesses a reason to employ more workers as opposed to replacing existing workers?
You might be tempted to argue that more intense competition among workers would lead to lower wages, and that cheap labor would encourage hiring. But that argument involves a fallacy of composition. Cut the wages of some workers relative to those of other workers, and those accepting the wage cuts may gain a competitive edge. Cut everyone’s wages, however, and nobody gains an edge. All that happens is a general fall in income — which, among other things, increases the burden of household debt, and is therefore a net negative for overall employment.
The point is that employment in today’s American economy is limited by demand, not supply. Businesses aren’t failing to hire because they can’t find willing workers; they’re failing to hire because they can’t find enough customers. And slashing unemployment benefits — which would have the side effect of reducing incomes and hence consumer spending — would just make the situation worse.
Still, don’t expect prominent Republicans to change their views, except maybe to come up with additional reasons to punish the unemployed. For example, Senator Rand Paul recently cited research suggesting that the long-term unemployed have a hard time re-entering the work force as a reason to, you guessed it, cut off long-term unemployment benefits. You see, those benefits are actually a “disservice” to the unemployed.
The good news, such as it is, is that the White House and Senate Democrats are trying to make an issue of expiring unemployment benefits. The bad news is that they don’t sound willing to make extending benefits a precondition for a budget deal, which means that they aren’t really willing to make a stand.
So the odds, I’m sorry to say, are that the long-term unemployed will be cut off, thanks to a perfect marriage of callousness — a complete lack of empathy for the unfortunate — with bad economics. But then, hasn’t that been the story of just about everything lately?
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 8, 2013
I like capitalism.
Specifically, I like the idea that if I write a better book, have a better idea, build a better mousetrap, I will be rewarded accordingly. A system where everyone gets the same reward regardless of quality or quantity of work is inconsistent with excellence and innovation, as the mediocrity and inefficiency that beset the Soviet Union readily proves.
The woman who is successful under capitalism gets to eat steak and lobster whenever she wants. That’s never bothered me. What does bother me is the notion that the unsuccessful man who lacks that woman’s talent, resources, opportunities or luck should not get to eat at all. There is something obscene in the notion that a person can work full-time for a multinational corporation and not earn enough to keep a roof over his head or food on his table. The so-called safety net by which we supposedly protect the poor ought to be a solid floor, a level of basic sustenance through which we, as moral people, allow no one to fall — particularly if their penury is through no fault of their own.
Maybe you regard that opinion as radical and extremist. Maybe it is. But if so, I am in excellent company.
Martin Luther King, for instance, mused that “there must be a better distribution of wealth and maybe America must move toward a democratic socialism.”
The Apostle Paul writes in 2 Corinthians 8:13-15, that it’s wrong for some to live lives of ease while others struggle. “The goal is equality, as it is written: ‘The one who gathered much did not have too much and the one who gathered little did not have too little.’” In Acts 4:32, Luke writes approvingly of the early church that: “No one claimed that any of their possessions was their own, but they shared everything they had.”
Which brings us to the Pope — and Rush Limbaugh. As you may have heard, the former has issued his first Apostolic Exhortation, The Joy of the Gospel, in which, among other things, he attacks the free market and what he calls an “economics of exclusion.” This had the latter up in arms last week on his radio show.
Pope Francis writes that poverty must be “radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality…”
“This is astounding … and it’s sad,” says Limbaugh. “It’s actually unbelievable.”
“How can it be that it is not a news item,” writes the Pope, “when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?”
“This is just pure Marxism coming out of the mouth of the Pope,” fumes Limbaugh.
Trickle-down economics, writes the pontiff, “expresses a crude and naive trust in the goodness of those wielding economic power…”
Maybe, says Limbaugh, his words were deliberately mistranslated by “the left.” No, seriously, he said that.
But then, some of us are fine with faith so long as it speaks in platitudinous generalities or offers a weapon to clobber gay people with, but scream bloody murder when it imposes specific demands on our personal conscience — or wallet.
It is perfect that all this unfolds in the season of thanksgiving, faith and joy, as people punch, stun-gun and shoot one another over HDTVs and iPads and protesters demand what ought to be the bare minimum of any full-time job: wages sufficient to live on.
This is thanksgiving, faith and joy? No. It is fresh, albeit redundant evidence of our greed — and of how wholeheartedly we have bought into the lie that fulfillment is found in the things we own.
Some of us disagree. Some us feel that until the hungry one is fed and the naked one clothed, the best of us is unfulfilled, no matter how many HDTVs and iPads he owns. This is the radical, extremist ideal embraced by the human rights icon, the Gospel writers, the Bishop of Rome — and me.
By: Leonard Pitts, J., Featured Post, The National Memo, November 4, 2013
The House of Representatives is back in session this week and facing a laundry list of issues that were not dealt with in the first 11 months of the year. The House plans to be in session for two weeks, sending members home for the rest of the year on Friday, Dec. 13. Friday the 13th; that seems like a bad omen. And it may, indeed, be a very unlucky day for the nation if the House really does adjourn for the year.
The Senate, on the other hand, is not back in session until Dec. 9 and plans to stay in town until Dec. 20. For everyone keeping track, that means the two chambers will only be in town at the same time for five “working” days.
If the Congress had been doing its job all year, this scheduling mismatch might not be such a problem. But it hasn’t. Not a single regular appropriations bill funding a government department or agency for the coming fiscal year has passed the Senate. The House has passed four of 12 required spending bills. Even if there was no other business to do, Congress could not complete the remaining work to fund government for the rest of fiscal year 2014 in a single week of “togetherness” in Washington.
And there is other business to do. The conference of the House and Senate Budget Committees, the result of the deal that ended the government shutdown, has apparently made progress in the last week, but hopes are not high for any real solution to the long-term budget problems facing the nation. A narrow agreement to set spending limits that will replace sequestration with other revenue or cuts for the next two years may be better than nothing … or it may not. The devil is always in the details and we don’t know the details yet. The deadline for those negotiations to conclude is also Friday the 13th, but that deadline has no real teeth since the current continuing resolution to keep the government funded doesn’t expire until Jan. 15 of next year.
The bill setting policy for the Department of Defense, a bill that has been successfully passed and signed into law every year for more than 50 years, has not been passed by the Senate. The House finished its work in June. This bill was on the Senate floor when Majority Leader Harry Reid, D-Nev., brought up the resolution that finally granted the Senate majority the so-called “nuclear option,” changing Senate procedure to allow most executive branch and judicial nominations to be resolved with a simple majority vote.
And speaking of confirmations, that brings up another deadline. The Senate needs to confirm a new chairman of the Board of Governors of the Federal Reserve System by Jan. 31, 2014, the expiration of Chairman Ben Bernanke’s term.
But that’s not all Congress has on its “must pass” list. The current farm bill extension expired on Sept. 30, but that doesn’t have much impact. Nutrition programs continue, crop insurance never expires. But on Jan. 1, taxpayers meet the dreaded “dairy cliff.” This is when the administration, because of 60-year old laws aggies refuse to repeal, will have to take us back to 1950s era dairy policy and guarantee milk producers artificially high prices resulting in as much as $8 per gallon milk on a grocery store shelf near you. (Of course, another alternative is that Congress could simply repeal the outdated law and allow the market to set milk prices. But we know that is too logical of an action for this Congress to take).
The fiscal cliff deal made a permanent fix for the encroaching alternative minimum tax, but another hardy perennial, the Medicare doctor payment fix, was left out. This would reduce the payments to doctors under Medicare. While it was adopted as a budget control measure, it’s been legislatively “fixed” each year. That issue looms.
Also, there’s the tax extenders package. That’s the cat and dog mix of various special interest tax breaks benefitting everyone from NASCAR track owners to liquor distillers that gets tacked on to moving pieces of legislation every year. Except this year there doesn’t seem to be moving legislation to hitch the caboose to.
Remember, the House and the Senate currently plan to be together in Washington for only five days in December. Perhaps they will have a burst of efficiency and effectiveness by Dec. 20, but I’m not holding my breath.
By: Ryan Alexander, U. S. News and World Report, December 3, 2013
“Our Democracy Is Drowning In Big Money”: JP Morgan Chase, The Foreign Corrupt Practice Act, And The Corruption Of America
The Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street’s biggest bank, has been hiring the children of China’s ruling elite in order to secure “existing and potential business opportunities” from Chinese government-run companies. “You all know I have always been a big believer of the Sons and Daughters program,” says one JP Morgan executive in an email, because “it almost has a linear relationship” to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank’s “track record” for converting hires into business deals.
It’s a serious offense. But let’s get real. How different is bribing China’s “princelings,” as they’re called there, from Wall Street’s ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, Obama’s first Treasury Secretary, is now president of the private-equity firm Warburg Pincus; Obama’s budget director Peter Orszag is now a top executive at Citigroup.
Or, for that matter, how different is what JP Morgan did in China from Wall Street’s habit of hiring the children of powerful American politicians? (I don’t mean to suggest Chelsea Clinton got her hedge-fund job at Avenue Capital LLC, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)
And how much worse is JP Morgan’s putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians — making the Street one of the major backers of Democrats as well as Republicans?
The Foreign Corrupt Practices Act, under which JP Morgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of “securing any improper advantage.” Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.
JP Morgan couldn’t even defend itself by arguing it didn’t make any particular deal or get any specific advantage as a result of the hires. Under the Act, the gift doesn’t have to be linked to any particular benefit to the American firm as long as it’s intended to generate an advantage its competitors don’t enjoy.
Compared to this, corruption of American officials is a breeze. Consider, for example, Countrywide Financial’s generous “Friends of Angelo” lending program, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst. No criminal or civil charges have ever been filed related to these loans.
Even before the Supreme Court’s shameful 2010 “Citizens United” decision — equating corporations with human beings under the First Amendment, and thereby shielding much corporate political spending – Republican appointees to the Court had done everything they could to blunt anti-bribery laws in the United States. In 1999, in “United States v. Sun-Diamond Growers,” Justice Scalia, writing for the Court, interpreted an anti-bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies.
We don’t even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians. Last year around this time, when the Securities and Exchange Commission released its 2013 to-do list, it signaled it might formally propose a rule to require corporations to disclose their political spending. The idea had attracted more than 600,000 mostly favorable comments from the public, a record response for the agency.
But the idea mysteriously slipped off the 2014 agenda released last week, without explanation. Could it have anything to do with the fact that, soon after becoming SEC chair last April, Mary Jo White was pressed by Republican lawmakers to abandon the idea, which was fiercely opposed by business groups.
The Foreign Corrupt Practices Act is important, and JP Morgan should be nailed for bribing Chinese officials. But, if you’ll pardon me for asking, why isn’t there a Domestic Corrupt Practices Act?
Never before has so much U.S. corporate and Wall-Street money poured into our nation’s capital, as well as into our state capitals. Never before have so many Washington officials taken jobs in corporations, lobbying firms, trade associations, and on the Street immediately after leaving office. Our democracy is drowning in big money.
Corruption is corruption, and bribery is bribery, in whatever country or language it’s transacted in.
By: Robert Reich, The Robert Reich Blog, December 8, 2013