I have two major objections to the bill. First is that this is not “pay go” and second this is all about politics and an election.
The House bill was structured as an “emergency” spending bill. This designation allows for it to be exempt from the pay go rules. I am one of those who think that the biggest emergency the country faces is the size of the budget deficit. This bill would add $34 billion to our debt load. Here is how the CBO scored it.
If the Senate passes this bill it would extend benefits to the end of November. Gee, that is a convenient time. Just a few weeks past the critical bi-elections. This bill has little to do with structural unemployment. It is about buying votes and trying to sustain political control of Congress. Those that support/vote for it will say that they are doing so to help the unemployed. Actually it is just more bad legislation. This is about politics, not economics.
The Senate has gone on a ten-day holiday and will pick up the proposed legislation when they return. The vote will be on party lines. As of this weekend that means the White House has 57 of the 60 votes needed to pass. Olympia Snowe (R. Ma.) has indicated she will support it. Therefore they are two votes shy. If this deal clears the Senate and becomes law it would mean that two Republican Senators had their arms twisted, that or they had their political palms greased with some form of side deal. Washington at its worst.
Does it matter that we are adding another $34b to our debt load when the debt is already $14 trillion? Not really. This only increases our debt by a ¼%. It is equivalent to about 20 days of interest. We are in so deep at this point that $34b is a very small number. How is that possible?
I think the outcome of this legislation is important in a number of respects. It will influence markets and the economy.
-If passed, it will be a weight on the dollar. Outside of the US every country is singing fiscal conservatism. We stand out in the opposite camp. Passage of this bill will be reflected in the capitol markets.
-If enacted it will have some short-term beneficial impacts. It will keep consumption going for a bit longer. More I-phones will be bought, the number of defaults will be a bit less, there will be some monthly data released that will hide some of the weakness.
-The President’s fiscal commission will release its results on December 1st. The day after the extension of benefits will expire and three weeks after the election. There is no way this temporary extension will be extended at that point. Either we hit a wall then or we hit a wall now. The President and the legislative side of D.C. will not be able to avoid the recommendations of the fiscal commission.
-If this bill is not passed it will accelerate the slowdown that now seems to be coming at a frightening speed. Consider these two graphs of the number of people who will be impacted. By the end of July the number grows to 3.2mm. These are big numbers. This will show up on Wal-Mart’s sales. It will show up everywhere. Consumption will drop. Landlords will not get paid. Confidence will drop. Markets will drop. Federal and State revenues will drop. Deficits will rise. Debt will rise. These things will happen sooner versus later. H.R. 5618 just buys a few months.
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The House just approved a $33b funding request for the war in Bottomless Pit (Afghanistan/Iraq).
ReplyDeletehttp://www.heralddemocrat.com/hd/News/Washington-Digest--7-4-10
Debate over the war took place as the House considered an $80 billion spending bill that included $33 billion for the wars in Afghanistan and Iraq.
Which is worst again?
So its ok to pass a supplemental war spending bill but not an unemployment bill?
ReplyDeleteAn interesting exchange on Fox Business puts the problem in a concrete perspective. Public employees in one CA jurisdiction were threatening to walk-out of their jobs if their demands of 20% pay increase were not met versus the 10% they were offered. In the same area there were 83,000 unemployed. The Fox commentator said: "let them walkout --there are all these unemployed people that could take their clerical jobs happily and do the work involved with ease!" (summarization of what was said -these were not the exact words!).
ReplyDeleteInstitutionalized unemployment is always created by the government, by minimum wages, all kinds of OSHA and workplace rules with labor union thuggery that resists the firing of employees, but much worst has been the boom created by fed of masive credit expansions created "magically" from thin air without the actual backing of any production. The necessary adjustments to recover from this government created mess will necessarily mean a lot of pain. This will include substantial lowering of labor wages at various levels. Further political meddling to continue to keep up the sham that everything is ok with further unemployment benefits only means a further drain on the productive in this country to support the unproductive. It will mean that much longer for those looking for work to accept the reality of lower wages or looking for work in different areas to accept reality. Government is not santaclaus, but the giver of further shots to someone that it has forced to become an alcoholic.
I don't know what is right. Afghanistan is a rat hole that our troops are dying in. Unemployment benefits that last for ever will kill us too.
ReplyDeletewhat are the 7 million who have been without a paycheck for over 6 months or more supposed to do for food and rent?
ReplyDeletehttp://research.stlouisfed.org/fred2/series/UEMP27OV?rid=50&soid=22
"what are the 7 million who have been without a paycheck for over 6 months or more supposed to do for food and rent?" --
ReplyDeletewe should have been asking these questions that would necessarily be a consequence of government spending booms followed by busts a long time ago. And if we do not want to kill the remaining productive businesses' of the economy we better ask the government to stop now or else more of them will have to close their doors because of government spending that will necessitate increasing taxes and skyrocketing inflation at some point. If we do not get governments at federal and state, local level to stop now --that same questions at present posed would be asked with the number more like 70 million. But by that time many of us in the spreading grayness of poverty would have lost the sense of a standard of living unsurpassed anywhere else in the world that we once had.
I believe productivity can increase and spending can be cut, but there are so many problems, where to begin?
ReplyDeleteHugely expensive wars that cause backlash and potential terrorist acts, justifying more hugely expensive wars.
Totally unnecessary US bases in foreign countries.
Minor drug offenders in jail, costing large sums of money, while they are prevented from working and/or supporting their families--and will be stigmatized when they eventually get out, discouraging future potential employers.
Public employee wage increases that have absolutely no basis in reality.
One of the most expensive and least effective education system in the world, in which teachers are protected from reviews of their effectiveness.
Few limits on medical liability, feeding through to the costs of health care.
Expensive local law enforcement that spends most of its time on drug busts and traffic violations.
Illegal immigrants taking construction jobs that US citizens _are_ willing and ready to do. (Not all illegals are fruit pickers.)
Legislators encumbered by debts to the special interests that elected them. Legislation that benefits large established businesses at the expense of startups.
Farm subsidies.
Ethanol.
"Green" energy subsidies in a nation that has huge reserves of natural gas.
A two-party system that has refined itself so that encumbents are mostly re-elected, and third-party candidates have the deck stacked against them--even though increasing numbers of voters describe themselves as "independent."
Old-school journalism that has become totally dependent on government press releases, leaks, and "off the record" information, at federal and local level, and therefore is reluctant ever to offend anyone in government. Media outlets are now so heavily influenced by government, we no longer have a truly free press (with a few exceptions).
Drug laws that continue to criminalize a potentially lucrative source of tax money.
Tariffs affecting free trade.
And so on. Trying to see a common source of these problems, I find political animals who will do anything that they believe will get them re-elected, regardless of the long-term consequences. And this is a system that seems almost impossible to change.
I think everything has to get much, much worse before some kind of truly radical uprising forces "leadership" of the nation to respond. Remember the extreme backlash that was required to discourage Nixon from continuing the Vietnam war. And that was fuelled by students who didn't want to be conscripted and possibly wounded or killed. (The draft was eliminated soon afterward, so that _that_ problem would not recur.) If fear of death is the real fuel for change, we have a way to go.
So what does that look like Charles? A march on D.C. to get some jobs? That may have worked in 1970 to end a war but it will not create jobs today.
ReplyDeleteA "throw the bums out" election this fall?? I doubt that has much impact. They are all bums.
An economic recovery that starts to take hold? Not likely at all.
A new war someplace to divert attention? We have two of those. We can't afford another. It will not achieve the desired results.
For the life of me I can't see what changes the status quo. Non of the historical tricks are working, none will work.
Where does this go? Read the comments at ZH on this article. The people are lining up on both sides. And they are all angry. Could it be that we are headed into some social chaos? That is a distinct possibility.
if you type "struc" into a google search bar you get "structural unemployment" as a suggestion, and there are dozens that have been written recently; one recent that links to two others is here: http://economistsview.typepad.com/economistsview/2010/07/innovation-scaling-and-the-industrial-commons.html
ReplyDeletesomething ive been convinced of looking at this for a year & a half is that this isnt gonna fix easily...but to use the debt as an excuse to screw the victims is pretty heartless...im getting tired of the emails from friends who despite their best efforts cant find a job, have to cut off the internet, face eviction, starve themselves so their kids can eat, or wish that if only suicide would pay for her daughter's education....
If your child's kidneys were failing, if he were dying, you would go under the knife & give him one of yours. You would not hesitate, you would ignore the risk to your own life, you would damn the expense. Even if you knew it would ruin you.
ReplyDeleteAmerica is dying, but we're too cheap to care.
Bruce
ReplyDelete"Where does this go? Read the comments at ZH on this article. The people are lining up on both sides. And they are all angry. Could it be that we are headed into some social chaos? That is a distinct possibility."
RESPONSE: Oil producing states seceding from the Union by 2020, eg TX, CO, ND
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ReplyDeletePerhaps I skimmed your post too quickly; but Bruce, no doubt you saw Krugman's 7/4 column re the "heartless Republicans."
What a crock.
The Republicans were in favor of extending unemployment benefits. They simply and rightfully required that those extended benefits be funded via idle stimulus funds vs. funding them through additional debt.
That is all.
Let's say you are King for a week and you get to kill the UE bill. Elections come in November and you have newly minted hungry, *really* angry voters and declining economic activity.
ReplyDeleteOr, the bill gets passed and the economy slows a little. You know what? You still have angry voters come November.
"No" is not a plan. It's not even leadership.
So, what's the plan?
I've got a simple one:
Eliminate most patents.
Eliminate most Marks.
Eliminate most copyright legislation from the last 40 years.
Eliminate Corporation's citizen rights.
That's a crude plan.
However, I have a patent on the process, so if you use it, I will take you to Federal court and extract penalties. I also reserve all rights to the content, so you can't redistribute it either. I'll issue a DMCA takedown if you claim the idea as your own.
You stupid idiots. Don't pass the unemployment bill, espicially when I have already paid for my unemployment insurance. That is like collecting insurance premiums and not paying benefits. I have worked 45 years. JUST GIVE ME BACK ALL THE MONEY YOU HAVE STOLE FROM ME AND YOU DUM REPUBLICIANS CAN KEEP WARS FINANCED BY SELLING YOUR HOMES AND CARS. Me and 1.4 mil others cannot wait to get rid of you idiots!!!!!! I will happen! Come November you will be gone!!!!!!!
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