Doubt of the benefit: Why increasing unemployment aid is prolonging the recession

New York Post ^ | 11/26/2012 | CASEY B. MULLIGAN

[SeekAndFind]

More families used food stamps this past Thanksgiving than ever in history, while Congress is pushing to extend benefits — again — for the longterm unemployed.

But what if such aid isn’t helping us weather the recession, but instead prolonging it?

The White House, and other believers in Keynesian policy refer to subsidies to the unemployed, poor and financially distressed as “automatic stabilizers” and insist that subsidies have a large positive effect on national income.

Yet when the subsidy spigots were opened wide in 2008 and 2009, labor market activity contracted sharply, and stubbornly refuses to rebound.

It is time to reconsider the old-school economic idea that paying people to be unemployed reduces employment. The more we pay poor people, the more poor people we will have. The more we help people and institutions in financial distress, the more financial distress there will be.

It is easy to look at a particular instance of redistribution — say, unemployment benefits — and conclude that its aggregate effects are minimal, or approximately zero. But policymakers did not expand just one provision of one program.

Food-stamp recipients were given a big raise in October 2008, and then another raise six months later. Thanks to the elimination of asset-testing by the majority of states, just about anyone who is the sole earner in their household now find themselves eligible for food stamps during periods of unemployment.

The American Recovery and Reinvestment Act, popularly known as the stimulus, gave unemployment insurance recipients a weekly bonus, and offered to pay for the majority of their health insurance expenses. FDIC and Treasury reduced some “unaffordable” mortgage payments, which means that successful people need not apply. The list goes on and on.

The essential consequence for all of these is the same:

[muawiyah]

Probably something wrong with your thesis when we have 53% of recent college graduates ~ who can't get unemployment ~ unemployed.

I think it's more an issue of no jobs ~ Obama doesn't like jobs and he doesn't think anyone else wants jobs either.

[sickoflibs]

The unions protesting Walmarts Black Friday accused them of not paying a ‘living wage’.

But they dont have the same standard for unemployment comp which is ironic because the unions kill job as with Hostess and put the workers on the comp instead of a paycheck.

[StAnDeliver]

Casey needs to take a Mulligan -- U6 crested 9% at the beginning of 2008, before any of the Bobo Shitstorm and wasted stimulii hit. Job growth is not even keeping pace with work-age population entry.

It's not an anemic recovery, it's not the Great Recession, it's Depression Lite. Mulligan trying to corollary US work hours, I find particularly specious and unsupported.

Additionally, you can't tie UI to the other bennies. UI is paid for by employer insurance (albeit to the extent the Feds superceded that, that's on them); WIC and cramdown mortgages are not.

[GOPsterinMA]

I hate shopping in general, but I did go to WallyWorld on Friday to buy a few things...my contribution of GFY to ALL unions...

[MrB]

Yep, 0bama is inherently lazy, and comes from an inherently lazy culture, so thinks jobs are a nuisance.

The latest figures I’ve seen are that 160 million of 300 million people in this country rely on gov’t for their livelihood.

The only way out is through. This pig has to crash.

[campaignPete R-CT]

life in Soviet America. We are relieved of the burden of politics, as none is allowed. What is the real oppression for the common man? The economic ones are easy for some to survive. At least for me. Haiku can only amuse for so long.