The Other McCain

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Which Is Better for the Economy: Getting a Job or Collecting Unemployment?

Posted on | July 8, 2010 | 19 Comments

When Nancy Pelosi declared that unemployment compensation “creates jobs faster than almost any other initiative you can name,” most people laughed at this obvious affront to common sense. Yet considering that common sense doesn’t seem to be all that common — Nancy Pelosi is, after all, Speaker of the House — it’s nice to have someone explain precisely what’s wrong with Pelosi’s argument:

On the face of it, the idea that higher unemployment benefits won’t lead to more unemployment doesn’t make much sense. Imagine what the unemployment rate would look like if unemployment benefits were universally $150,000 per year. My guess is we’d have a heck of a lot more unemployment. Common sense and personal experience indicate higher unemployment benefits will make unemployment less unattractive and thereby increase unemployment even in the Great Recession. . . . [S]ince the 1970s there’s been a close correlation between increased unemployment benefits and an increase in the unemployment rate. . . .

That’s Art Laffer at the Wall Street Journal. Read the whole thing.

Comments

19 Responses to “Which Is Better for the Economy: Getting a Job or Collecting Unemployment?”

  1. Joe
    July 8th, 2010 @ 7:59 pm

    Q. Which Is Better for the Economy: Getting a Job or Collecting Unemployment?

    A. Well, for certain members of Congress and pundits (Paul Krugman comes immediately to mind, but there are many others) who cause far more damage than good, the answer would be collecting unemployment.

  2. Joe
    July 8th, 2010 @ 3:59 pm

    Q. Which Is Better for the Economy: Getting a Job or Collecting Unemployment?

    A. Well, for certain members of Congress and pundits (Paul Krugman comes immediately to mind, but there are many others) who cause far more damage than good, the answer would be collecting unemployment.

  3. Joe
    July 8th, 2010 @ 8:18 pm

    When you are a Democrat and have lost Streisand you are in trouble.

  4. Joe
    July 8th, 2010 @ 4:18 pm

    When you are a Democrat and have lost Streisand you are in trouble.

  5. crazyshoe
    July 8th, 2010 @ 9:16 pm

    art laffer? you’re . . . you’re quoting art laffer. i don’t know what he did before or after he was on tv with peter schiff. because whatever it was it amounts to nothing.

  6. crazyshoe
    July 8th, 2010 @ 5:16 pm

    art laffer? you’re . . . you’re quoting art laffer. i don’t know what he did before or after he was on tv with peter schiff. because whatever it was it amounts to nothing.

  7. Stogie
    July 8th, 2010 @ 9:51 pm

    gg, the “Laffer Curve” is real. Democrats never understand “cause and effect” in economic issues. Raising taxes too much does indeed become self-defeating, as the tax base shrinks to offset, or more than offset, the rate increase.

    I read your link, and didn’t see anything “stupid,” but what is the point of quoting a “colleague” of Laffer, as if that were the same thing as quoting Laffer himself?

  8. Stogie
    July 8th, 2010 @ 5:51 pm

    gg, the “Laffer Curve” is real. Democrats never understand “cause and effect” in economic issues. Raising taxes too much does indeed become self-defeating, as the tax base shrinks to offset, or more than offset, the rate increase.

    I read your link, and didn’t see anything “stupid,” but what is the point of quoting a “colleague” of Laffer, as if that were the same thing as quoting Laffer himself?

  9. Bill S.
    July 8th, 2010 @ 9:53 pm

    I’m currently unemployed, and thanks to Congress I have goose-egg for supporting my family of five while I am looking for work. Given the choice, I’d rather be working, any day.

    I consider Unemployment to be a “hand UP”, not a “hand OUT”. There is a big difference between the two.

  10. Bill S.
    July 8th, 2010 @ 5:53 pm

    I’m currently unemployed, and thanks to Congress I have goose-egg for supporting my family of five while I am looking for work. Given the choice, I’d rather be working, any day.

    I consider Unemployment to be a “hand UP”, not a “hand OUT”. There is a big difference between the two.

  11. What an interesting coincidence « DaTechguy's Blog
    July 8th, 2010 @ 5:57 pm

    […] an interesting coincidence By datechguy Robert Stacy’s post happens to coincide with a subject that recently came up for […]

  12. Jeff Weimer
    July 8th, 2010 @ 10:44 pm

    The issue is, Bill, how long should benefits be paid? Until recently it was up to 99 weeks – nearly two years. How long should it be? Until you get a job, no matter how long it takes? That leaves one tempted to adjust to the “new normal” of receiving assistance forever. Getting paid to do nothing is great. One could get used to that, and where would we be then?

    The larger argument, between Laffer and Pelosi – how stimulative is UI? Laffer wins hands down. Although the money is used immediately in the economy, and is one of the more laudable uses for spending (compared to much of the “stimulus”), it’s still a net drag on the economy. There’s a lot of “friction” between the taxpayer (or bondholder) and recipient in the form of administrative overhead, so only a large fraction of that first dollar goes to the recipient.

    The biggest problem about its stimulative effect is that it’s too narrowly focused, like much of the rest of the stimulus plans. If giving money to part of the country is good, why not giving it to everybody not better? Laffer himself proved that easing the tax burden (specifically) on everyone has an explosive stimulative effect, and the Bush tax cuts repeated that, despite the howls of the very same people (Pelosi) who want to “stimulate” the economy while tying one hand behind our back.

  13. Jeff Weimer
    July 8th, 2010 @ 6:44 pm

    The issue is, Bill, how long should benefits be paid? Until recently it was up to 99 weeks – nearly two years. How long should it be? Until you get a job, no matter how long it takes? That leaves one tempted to adjust to the “new normal” of receiving assistance forever. Getting paid to do nothing is great. One could get used to that, and where would we be then?

    The larger argument, between Laffer and Pelosi – how stimulative is UI? Laffer wins hands down. Although the money is used immediately in the economy, and is one of the more laudable uses for spending (compared to much of the “stimulus”), it’s still a net drag on the economy. There’s a lot of “friction” between the taxpayer (or bondholder) and recipient in the form of administrative overhead, so only a large fraction of that first dollar goes to the recipient.

    The biggest problem about its stimulative effect is that it’s too narrowly focused, like much of the rest of the stimulus plans. If giving money to part of the country is good, why not giving it to everybody not better? Laffer himself proved that easing the tax burden (specifically) on everyone has an explosive stimulative effect, and the Bush tax cuts repeated that, despite the howls of the very same people (Pelosi) who want to “stimulate” the economy while tying one hand behind our back.

  14. Estragon
    July 9th, 2010 @ 4:50 am

    Laffer makes a fundamental mistake in relying upon “Common sense and personal experience . . . ” because Pelosi, like most of her Democratic colleagues, possesses neither.

  15. Estragon
    July 9th, 2010 @ 12:50 am

    Laffer makes a fundamental mistake in relying upon “Common sense and personal experience . . . ” because Pelosi, like most of her Democratic colleagues, possesses neither.

  16. dissident
    July 9th, 2010 @ 12:53 pm

    I did not realize we needed an explanation from Pelosi’s ramblings..

  17. dissident
    July 9th, 2010 @ 8:53 am

    I did not realize we needed an explanation from Pelosi’s ramblings..

  18. Roxeanne de Luca
    July 9th, 2010 @ 1:50 pm

    If unemployment is stimulative, we should just give it to the entire country. Tell everyone to take a holiday, give them money, and watch the economy grow!

    Oh, wait, it doesn’t work like that, as anyone with half a brain can tell.

  19. Roxeanne de Luca
    July 9th, 2010 @ 9:50 am

    If unemployment is stimulative, we should just give it to the entire country. Tell everyone to take a holiday, give them money, and watch the economy grow!

    Oh, wait, it doesn’t work like that, as anyone with half a brain can tell.