New Unemployment Bill: S3551 (1 Viewer)

[The Giant Noodle]

I was calling all the Senators today regarding unemployment and found that Senator (R) Scott Brown has made a Bill using unused Stimulus money to fund the extension for Unemployment!!! It is a compromise between Dems and Repubs.....

Lets hope it PASSES!!!!!!!!!!!! eace

 

[BDBoop]

Thanks for the heads-up!

 

[imagep]

I was calling all the Senators today regarding unemployment and found that Senator (R) Scott Brown has made a Bill using unused Stimulus money to fund the extension for Unemployment!!! It is a compromise between Dems and Repubs.....

Lets hope it PASSES!!!!!!!!!!!! eace

Or not. Unemployement is not by any means the best method of stimulating the economy. I thought that you were a Libertarian!

 

[Lord Tammerlain]

Or not. Unemployement is not by any means the best method of stimulating the economy. I thought that you were a Libertarian!

Perhaps Libertarians and conservatives become realists when facing reality

The prospect of being unemployed and losing the sole source of income keeping you from losing everything is reality

 

[drz-400]

Or not. Unemployement is not by any means the best method of stimulating the economy. I thought that you were a Libertarian!

Actually, I think you would be surprised. Unemployment beneficiaries have a higher Marginal propensity to consume, and therefore the multiplier effect of spending on unemployment benefits is higher than transfers or tax cuts to other people. About the only way the government could get more bang for its buck would be direct spending, however, this would have the problems of time lag. So for a quick policy change that boosts the economy, unemployment benefits are one of the best.

 

[NolaMan]

Actually, I think you would be surprised. Unemployment beneficiaries have a higher Marginal propensity to consume, and therefore the multiplier effect of spending on unemployment benefits is higher than transfers or tax cuts to other people. About the only way the government could get more bang for its buck would be direct spending, however, this would have the problems of time lag. So for a quick policy change that boosts the economy, unemployment benefits are one of the best.

What a joke. $100 in unemployment benefits can be spent at a grocery store, which, in turn, can use that $100 to pay salaries and support other jobs. The total amount of additional economic activity will be well above $100; but because government borrows the $100, that same money is now unavailable to the private sector--which would have spent the same $100 with the same multiplier effect.

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

This whole Keynesian balony about how "new" spending of $1 will create $1.50 in economic benefits simply cannot explain why the massive government spending to the tune of (just for example) 1.5 trillion has not created 3 trillion in new economic growth.

 

[Lord Tammerlain]

What a joke. $100 in unemployment benefits can be spent at a grocery store, which, in turn, can use that $100 to pay salaries and support other jobs. The total amount of additional economic activity will be well above $100; but because government borrows the $100, that same money is now unavailable to the private sector--which would have spent the same $100 with the same multiplier effect.

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

This whole Keynesian balony about how "new" spending of $1 will create $1.50 in economic benefits simply cannot explain why the massive government spending to the tune of (just for example) 1.5 trillion has not created 3 trillion in new economic growth.

How do you know it has not?

How do you know the economy would not be down $3 trillion in activity from where it is now without the government stimulus (just for example)

What i am suggesting is that

The economy was going to contract $3 trillion dollars with out government stimulus, but rather stays stagnant with $1.5 trillion in government stimulus. Meaning the stimulus has helped, it is just not noticable because the economuy did not grow. But it did not crash either

 

[NolaMan]

How do you know it has not?

Because very few economists have argued that point.

How do you know the economy would not be down $3 trillion in activity from where it is now without the government stimulus (just for example)

Because in FY2009 the economy shrank by 2.3 percent, despite the fact that we increased deficit spending by roughly 7% of GDP over that time period. To argue that the Keynesian economics works here is to argue that we would otherwise have had a 9.3% fall in the economy for FY2009. There are basically no economists, even those who liked the stimulus, that argue that would have been the case... but that is what the Keynesian theory tells us it would have had to be.

What i am suggesting is that

The economy was going to contract $3 trillion dollars with out government stimulus, but rather stays stagnant with $1.5 trillion in government stimulus. Meaning the stimulus has helped, it is just not noticable because the economuy did not grow. But it did not crash either

The point remains, and you did not address it, that "government stimulus" is incapable of creating jobs because it has to take money from the private sector (borrow etc) in order to fund it, and that elimintes the same amount of economic activity from the private sector.

You can hardly argue that the government spending a dollar will create (for example) $1.50 in economic activity, but a private sector dollar will not. But that is what you have to argue to support government stimulus, because the government has to take away private sector money to fund this "stimulus."

 

[Lord Tammerlain]

Because very few economists have argued that point.

Just because the same economists who didnt see the housing bubble coming, who didnt see this recession coming didnt see the economy potentially contracting by 10% doesnt mean that it wouldnt have. The fact that those economist didnt see the problem before it hit, sort of makes their judgement suspect in my opinion

Because in FY2009 the economy shrank by 2.3 percent, despite the fact that we increased deficit spending by roughly 7% of GDP over that time period. To argue that the Keynesian economics works here is to argue that we would otherwise have had a 9.3% fall in the economy for FY2009. There are basically no economists, even those who liked the stimulus, that argue that would have been the case... but that is what the Keynesian theory tells us it would have had to be.



The point remains, and you did not address it, that "government stimulus" is incapable of creating jobs because it has to take money from the private sector (borrow etc) in order to fund it, and that elimintes the same amount of economic activity from the private sector.

You can hardly argue that the government spending a dollar will create (for example) $1.50 in economic activity, but a private sector dollar will not. But that is what you have to argue to support government stimulus, because the government has to take away private sector money to fund this "stimulus."

This is a poor arguement.

First yes the government borrowed money to fund the deficit. Did it take money that the private sector would have borrowed instead, not likely. Banks were not lending to private institutions because they were too much of a credit risk.

Secondly you are ignoring where money comes from in the US. Banks use leverage on their deposits to lend far more money out then they have in reserves. During the bubble years, banks had a loan to reserve ratio of 23:1. Banks have been creating money like mad over the last 30 years, government have been borrowing money like mad, as well, but private companies and individuals have borrowed even more. The US total debt to GDP is at 350%+ while in 1980 or so it was around 175%. Despite all the goverrnment borrowing over the last 30 years, the private sector was not left wanting for money to borrow

 

[The Giant Noodle]

What a joke. $100 in unemployment benefits can be spent at a grocery store, which, in turn, can use that $100 to pay salaries and support other jobs. The total amount of additional economic activity will be well above $100; but because government borrows the $100, that same money is now unavailable to the private sector--which would have spent the same $100 with the same multiplier effect.

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

This whole Keynesian balony about how "new" spending of $1 will create $1.50 in economic benefits simply cannot explain why the massive government spending to the tune of (just for example) 1.5 trillion has not created 3 trillion in new economic growth.

I dont think you understand how HUGELY ignorant and just idiotic what you wrote is. :slapme:
You should be beyond embarrased.

I think you need to lose your job and saving my friend. You need a lesson in life. (and economics)

 

[NolaMan]

I dont think you understand how HUGELY ignorant and just idiotic what you wrote is. :slapme:
You should be beyond embarrased.

I think you need to lose your job and saving my friend. You need a lesson in life. (and economics)

Duplicate.

 

[NolaMan]

I dont think you understand how HUGELY ignorant and just idiotic what you wrote is. :slapme:
You should be beyond embarrased.

I think you need to lose your job and saving my friend. You need a lesson in life. (and economics)

Of course, if it is not Keynesian, it is "stupid" right?

Unlike you apparently, I have prepared for potenital job loss and wouldn't be all that bothered if my job went away.

 

[Lord Tammerlain]

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

This whole Keynesian balony about how "new" spending of $1 will create $1.50 in economic benefits simply cannot explain why the massive government spending to the tune of (just for example) 1.5 trillion has not created 3 trillion in new economic growth.

The $10 000 the family put into the bank would not just be lent out at a total of $10 000. Traditional it would have been $90 000. They would have lent that original $10 000 out the equivalent of 9 times. In the last decade or so, that $90 000 has gone up to $170 000

 

[The Giant Noodle]

Of course, if its not Keynesian, its stupid right?

*bitting touge* :slapme:

 

[NolaMan]

Just because the same economists who didnt see the housing bubble coming, who didnt see this recession coming didnt see the economy potentially contracting by 10% doesnt mean that it wouldnt have. The fact that those economist didnt see the problem before it hit, sort of makes their judgement suspect in my opinion

I mean, if the general agreement among mainstream economists does not sway you, I am not sure what will. You cannot write off basically the entire economic community because they did not see something coming.

This is a poor arguement.

First yes the government borrowed money to fund the deficit. Did it take money that the private sector would have borrowed instead, not likely. Banks were not lending to private institutions because they were too much of a credit risk.

Again, not accurate. Even when banks hesitate to lend their deposits, they invest them in Treasury bills to keep them circulating through the economy and earning interest. In fact, the federal funds market--where banks lend each other any excess cash at the end of the day--exists because banks refuse to sit on unused cash even overnight.

Secondly you are ignoring where money comes from in the US. Banks use leverage on their deposits to lend far more money out then they have in reserves. During the bubble years, banks had a loan to reserve ratio of 23:1. Banks have been creating money like mad over the last 30 years, government have been borrowing money like mad, as well, but private companies and individuals have borrowed even more. The US total debt to GDP is at 350%+ while in 1980 or so it was around 175%. Despite all the goverrnment borrowing over the last 30 years, the private sector was not left wanting for money to borrow

Leveraged or not, that money was in the private sector, creating the exact same multiplier effect that it would if the government took it and spent it themselves. The fact that the government then actually did take it, and claimed to "create jobs" with it is completely bogus. Why is it that with all the jobs "created" we continue to have high unemployment? It is because the government is not simply transferring dollars (to create jobs), but they are in essence transferring jobs, by taking money away from the private sector.

Good article on it all, I have been citing from it.

 

[NolaMan]

The $10 000 the family put into the bank would not just be lent out at a total of $10 000. Traditional it would have been $90 000. They would have lent that original $10 000 out the equivalent of 9 times. In the last decade or so, that $90 000 has gone up to $170 000

That is irrelevant to the fact that it was in the private sector, going through the same multiplier effect that it would if the government took it. How much was taken does not take away from the point that it was in fact taken.

 

[NolaMan]

*bitting touge* :slapme:

Well unbite it. I want to hear your brilliant rebuttal.

 

[ptif219]

The democrats opposed the GOP plan in June to pay for unemployment benefits and not add to the debt

 

[Lord Tammerlain]

That is irrelevant to the fact that it was in the private sector, going through the same multiplier effect that it would if the government took it. How much was taken does not take away from the point that it was in fact taken.

The point is, it is not in the private sector because the government took the, money. It is not in the private sector because the banks did not want to lend to the private sector. The banks could have lent money out to both and have done so over the last 30 years with abandon

 

[NolaMan]

The point is, it is not in the private sector because the government took the, money.

Yes, the government did take the money, right out of the private sector.

It is not in the private sector because the banks did not want to lend to the private sector. The banks could have lent money out to both and have done so over the last 30 years with abandon

Banks are lending to the private sector however. Not at the historical rates I will agree, however that money is by no means sitting idle somewhere and in need of the government coming to take it to "put it to use and generate economic activity."

 

[Lord Tammerlain]

Yes, the government did take the money, right out of the private sector.



Banks are lending to the private sector however. Not at the historical rates I will agree, however that money is by no means sitting idle somewhere and in need of the government coming to take it to "put it to use and generate economic activity."

What you do not seem to understand is where/how money is created in a fait/fractional banking system.

The banks could tommorow lend money to the private sector, and to the government if they wanted to. The banks provided they have a high enough reserve ratio can create extra money for lending. With the amount of money the fed has provided to the banks, along with FASB changes the banks have all the opportunity in the world to lend to private and government entities

 

[pragmatic]

The democrats opposed the GOP plan in June to pay for unemployment benefits and not add to the debt

Notable point. Which is why i would suspect that this current bill is doomed to failure. It would/will be considered/viewed as a "defeat" by democrats....which would not be an acceptable outcome to the current debate.

Ain't gonna happen....


.

 

[NolaMan]

What you do not seem to understand is where/how money is created in a fait/fractional banking system.

The banks could tommorow lend money to the private sector, and to the government if they wanted to. The banks provided they have a high enough reserve ratio can create extra money for lending. With the amount of money the fed has provided to the banks, along with FASB changes the banks have all the opportunity in the world to lend to private and government entities

Yes, under the current system a bank can essentially create more money for lending, however this whole concept of deposit multiplication does not work if you eliminate the initial deposit, which is basically what the stimulus has done. It has taken away X amount of dollars that would otherwise have been deposited into these banks and then undergone a multiplier effect.

When banks are required to hold X amount of dollars (and rightfully so), you cannot take away a huge amount of money which would otherwise go to these banks, which the stimulus etc has done, and not expect that the overall level of initial deposits will decrease (or at best remain the same once the government comes back to deposit it) and you end up no better off than if you had just left it alone to begin with.

 

[drz-400]

What a joke. $100 in unemployment benefits can be spent at a grocery store, which, in turn, can use that $100 to pay salaries and support other jobs. The total amount of additional economic activity will be well above $100; but because government borrows the $100, that same money is now unavailable to the private sector--which would have spent the same $100 with the same multiplier effect.

Consider a more comprehensive example. A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new spending, jobs, or a multiplier effect. It has merely moved them to a new town.

This whole Keynesian balony about how "new" spending of $1 will create $1.50 in economic benefits simply cannot explain why the massive government spending to the tune of (just for example) 1.5 trillion has not created 3 trillion in new economic growth.

I disagree. At the time of the stimulus you cannot simply say that money would have been spent by the private sector. The economy contracted because of a large drop in private investment spending. Expectations about the economy were pretty grim.

Futhermore, interest rates have been dropping and banks are holding excess reserves, suggesting crowding out is a minimal problem at the moment.

 

[drz-400]

I should have also brought up the fact that interest rates are near 0. What rate can you get on a CD account right now? .02%? The opportunity cost of holding money is very low right now, and the demand for money is very elastic. People right now will hold onto cash.

And for the output gap, for a rough guess lets say the natural rate of unemployment is 6%, so the cyclical unemployment was near 4%. This implies an ouput gap of 8% (although it has deviated from this) according to okuns law. So lets say the output gap is roughly $1.05 trillion ($2005). I've heard that the multiplier at the time of the stimulus bill was 1.4 and the stimulus was around $800 bill. (nominal). So the CPI increased by about 20 pts from 2005 - 2009, which implies the stimilus is about $670 ($2005). So this very roughly puts the effect of the stimulus at around $930 billion. Combine this with the smaller stimulus bills and I bet it would not be too far off from where we are now.