This Should Not Be Necessary

Posted on | February 2, 2014 | 19 Comments

Headline at Patterico:

No, Extending Unemployment Benefits
Does Not “Create Jobs”

The basic economics of this should be obvious — it’s simple common sense — but ignorance of basic economics is rampant and common sense is increasingly rare, and so Patterico feels obliged to rebut this fallacy promoted by You Know Who:

“Voting for extending unemployment insurance helps people and creates jobs,” Obama said. “Voting against it doesn’t.”
It’s about time we took on this silly notion that paying people not to work causes more people to work . . .

Read the whole thing. It makes my head hurt even to think that such fathomless stupidity is possible, and the fact that Obama got elected twice — because a majority of Americans are apparently brain-damaged — fills me with existential horror.

Category: Economics

Comments

19 Responses to “This Should Not Be Necessary”

Dianna Deeley
February 2nd, 2014 @ 10:21 pm

No, somehow, it never does seem to be obvious.

I get tired of the oblivious nature of the left.
WarEagle82
February 2nd, 2014 @ 10:47 pm

By that logic, everyone should hope to be fired from their jobs so they could file for unemployment. Then we would all be rich!

Only modern, Marxist lunatics, churned out by modern Marxist lunatic universities could make such a claim.

Suddenly, Gump doesn’t seem so stupid compared to the crop of “geniuses” currently running things…
Unix-Jedi
February 3rd, 2014 @ 12:09 am

the fact that Obama got elected twice — because a majority of Americans are apparently brain-damaged

Let’s not forget that the GOP decided to run 2 guys that agreed with easily 75% of Obama’s policy points did play a bit of a role there.
Adjoran
February 3rd, 2014 @ 12:37 am

Ignorance of basic economics and civics isn’t just rampant, it’s policy. Public schools no longer place any emphasis on these areas and where they remain in the curricula at all, most of what is taught is wrong.

This is just another version of the Glazier’s Fallacy, a mistaken view that even broken windows help the economy since they must be replaced. The problem of course is that the window wouldn’t need to be replaced if someone had not broken it, and the shopkeeper might have had better uses for the money he must now spend on repairs. So there is no net gain at all, and in fact a loss since the resources are being misallocated for repairs, which has an inevitable ripple effect.
Adjoran
February 3rd, 2014 @ 12:38 am

Even Marxists with a nodding acquaintance with economics wouldn’t make such a claim. But ordinary American schoolchildren are spoon-fed this sort of nonsense every day.
Kirby McCain
February 3rd, 2014 @ 12:52 am

Rush Limbaugh has talked about the dumbing down of America for at least twenty years.
firefirefire
February 3rd, 2014 @ 5:30 am

at least we now know why the teachers unions have been “passing” students thru the educational system these past decades. Dumb people make for good democratic voters.
Dana
February 3rd, 2014 @ 7:01 am

Actually, the logic isn’t that bad. A person without a job and who cannot get one will be able to spend more money if he’s getting unemployment compensation than he would if he wasn’t. This is a velocity of money argument.

The part that they don’t tell you is that this only works when you are borrowing money from abroad. If the budget were balanced, UI would simply be redistribution of internal spending, so it wouldn’t be a net job creator. But, since overseas borrowing brings more money into the economy, if you borrow more to pay for UI, then you have increased the amount of money in the system, and the UI payments increase the velocity of money.

It’s simple Keynesianism, to which the left are wedded, because they don’t actually understand the economics. Keynesianism holds that you borrow during recessions, but you pay it back when times are good; we never paid it back, but continued to borrow.

The result has been that stimulus is useless, because the deficit spending every year made stimulus the new normal.
robertstacymccain
February 3rd, 2014 @ 8:46 am

Government borrowing, however, is a net loss for the economy, especially when the borrowed money is used in this way. Money borrowed by government comes from the same pool of capital that would otherwise be loaned to private borrowers or else invested in businesses. This results in less private sector economic activity. And extending unemployment benefits in such a way as to discourage people from seeking work harms the economy: Work creates value; collecting benefits does not.

Often, unemployed people are dealing with a skills mismatch. That is to say, they have been laid off by industries that no longer require their particular skill set. Paying them unemployment while they seek a similar job is useless, because the demand simply is not there. The person in such a predicament must find a job in a new field — and probably, enter that field at a lower level of pay than their previous job — and learn new skills.
Art Deco
February 3rd, 2014 @ 9:19 am

Which 75%?
Art Deco
February 3rd, 2014 @ 9:22 am

No, this is nothing knew. He is a lawyer who does not understand much about business and economics. That also describes Ralph Nader, who has been known to utter howlers with regularity and was once influential in a way he is not anymore. George McGovern was a decent and principled man in a way that few Democratic pols are nowadays, but he was just as much an economic illiterate. Remember wage and price controls? That was mainstream policy forty years ago. (Promoted by Richard Nixon, a lawyer; it was lapsed businessman Jimmy Carter who worked to rid us of their vestiges).
Unix-Jedi
February 3rd, 2014 @ 10:08 am

100%.
Dana
February 3rd, 2014 @ 2:56 pm

Our esteemed host wrote:

Government borrowing, however, is a net loss for the economy, especially
when the borrowed money is used in this way. Money borrowed by
government comes from the same pool of capital that would otherwise be
loaned to private borrowers or else invested in businesses. This results
in less private sector economic activity.

Such was the worry when the $831 billion porkulus plan was proposed, but it didn’t work out that way: there was so little private sector demand for money that the stimulus plan wasn’t competing with it at all. And interest rates are still so low that it’s obvious that there’s still no real increase in demand for loans.

Further, you have assumed that the pool of capital is has a limit that government borrowing has approached, crowding out others; that doesn’t seem to be the case, either.

The real problem comes when you have to repay the loans to foreign lenders. If everything had been borrowed internally, as it was in World War II — in 1947, 99% of the national debt was owed to Americans — all of the debt service payments would remain within our economy, and the debt service itself would work to increase the velocity of money. But, with us borrowing so much abroad, the debt service payments are taken out of our economy, and contributing to economic growth in China.

In the end, it’s all about production. If you only borrow internally, you never send debt service payments outside your economy, but you are limited by the country’s production as to how much money is available to be borrowed, and, more importantly, spent.
Dana
February 3rd, 2014 @ 3:00 pm

There’s also a lying-to-ourselves problem. Government spending is included in the calculation of gross domestic product, but since we have been borrowing so much from abroad, our GDP looks higher than it really is; it inflates spending above production, and thus overstates production.
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February 3rd, 2014 @ 4:07 pm

[…] This Should Not Be Necessary […]
Adjoran
February 3rd, 2014 @ 4:27 pm

In the case of Nixon, much of what he did was designed to forestall more serious actions by the Democratic Congress. He created EPA as an agency to prevent Congress making it a full Cabinet Department, for instance. And his “wage and price freeze” turned out to be more of a freeze on union wages, whereas the Democrats had been planning a true freeze that would have had devastating consequences. Nixon was a pragmatist.

That he understood economics should be clear from his “kitchen debate” with Khrushchev.
Art Deco
February 3rd, 2014 @ 4:37 pm

Not buying it. The Congress was around that time not quite evenly split between the main body of the Democratic Party conjoined to some Rockefeller Republicans on the one hand and the remainder on the other. I am fairly sure that none of Nixon’s vetoes were ever over-ridden and not many of Gerald Ford’s 65 vetoes were over-ridden (in spite of the 2/3 majority the opposition party had in Congress in 1975). The notion that Congress would have or could have re-imposed the full monty over Richard Nixon’s objections cannot be believed.

Nixon was not a pragmatist. He was an opportunist and a low grade head case. Read some of George Will’s columns from 1973 and 1974 on Nixon’s dealings with members of Congress from his own party. (“Now the President has all the friends he has earned and deserves”.)
Bob Belvedere
February 3rd, 2014 @ 6:37 pm

Don’t forget to give parents the share of the blame they so richly deserve.

How many these days open-up a checking and/or savings account for their kids and make them balance the register – to cite one small example?

My Father, thank God, went even further and I was keeping the books on his banquet hall / restaurant when I was fourteen. Writing out the tax checks was quite the learning experience.
Bob Belvedere
February 3rd, 2014 @ 6:40 pm

Did you have to cite Patterico?

Look, I have come to his defense many times in the fight against NR and BK because he did not deserve their horrible treatment, but, sorry, Patterico is still an arsehole.