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Research Desk responds: Is unemployment insurance stimulative?

By Dylan Matthews

Patrick_M wants to know whether fellow commenter Kevin_Willis is right in stating:

"... there is no evidence that indefinite extension of unemployment benefits has much of an economically stimulative effect, that I know of."

I actually touched on this a couple of weeks ago, when I highlighted Mark Zandi of Moody's comparison of the per-dollar impact of various stimulus policies. Zandi used his econometric model to estimate the effect on GDP, per dollar, of different elements in the 2009 stimulus package. Here's his explanation of the methodology:

The first step divides the stimulus bill -- both its spending and tax cuts -- into various components. The second step is to derive multipliers for each of these components, using historical data. ... The multipliers are combined with the actual spending to date under the ARRA to derive the change in GDP from the stimulus bill, relative to no stimulus. Finally, the historical relationship between GDP and employment is used to derive an estimate of the net impact of the stimulus on jobs.

With that process, Zandi estimated that each dollar spent on extending unemployment benefits generated $1.61 in economic growth. Extending benefits had the third-greatest bang-for-the-buck of any component in the stimulus package, after increasing food stamps and subsidizing work-sharing, both temporary measures. To quote Zandi, "No form of the fiscal stimulus has proved more effective during the past two years than emergency UI benefits." The Center for Budget and Policy Priorities looked at the impact on poverty of the extension and found that it saved a total of 800,000 people from falling below the poverty line. So far, then, unemployment benefits have been very effective at stimulating the economy and reducing economic misery among affected families.

That said, there's a second part to Kevin Willis's question. He asks not just about the extension of unemployment benefits, but the indefinite extension. This is harder to judge, but let's look at one counterargument raised by opponents of extending benefits. It is sometimes said that extending benefits for too long causes workers to become less motivated to look for jobs, which keeps the unemployment rate high and hurts the economic recovery. A paper from economists Rob Valletta and Katherine Kuang at the Federal Reserve Bank of San Francisco suggests this effect is likely quite small. To show this, they graphed average unemployment duration among both those who have lost their jobs (who are eligible for unemployment benefits) and those who have quit or just entered the job market (who are not). The differential between the two, then, can be said to be caused by extending unemployment benefits:

unemployment_by_reason.png

Valletta and Kuang explain:

As of the fourth quarter of 2009, the expected duration of unemployment had risen about 18.7 weeks for job losers and about 17.1 weeks for leavers and entrants, using the years 2006-2007 as a baseline. The differential increase of 1.6 weeks for job losers is the presumed impact of extended UI benefits on unemployment duration. ...The implied increase in the unemployment rate is quite small, slightly less than 0.4 percentage point, indicating that without UI extensions, the measured unemployment rate would have been 9.6% in December 2009 rather than the observed 10.0%.

Using the most recent estimate of the size of the labor force, a 0.4 oercent increase in the unemployment rate represents 614,964 people. This is not a trivial number, but losing the stimulative effect of unemployment benefits would increase the unemployment rate as well, likely canceling out this effect. This is not to mention the obvious point that 18.6 weeks of unemployment with benefits to help is a far better situation for families that 17.1 weeks with no assistance. Extending benefits, then, appears to be the economically smart thing to do even given this objection.

By Ezra Klein  |  July 2, 2010; 1:26 PM ET
 
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Next: Private-sector job growth doesn't look great, either

Comments

It's my understanding that the federal unemployment benefits last up to 99 weeks after state unemployment eligibility is exhausted.
Question: What is the difference between long-term federal unemployment benefits and welfare?


It's also true that because of deficit spending, all of this money is currently being borrwed, and will have to be paid back with interest. There are additional administrative costs associated with qualifying and paying these benefits.

The argument is reduced to: Can a government spend enough borrowed money to improve overall economic activity, and does the economic benefits of doing so outweigh the negative aspects of inflation, heavy interest costs, and dislocation of market economics. Ezra's analysis above strikes me as less than compelling that long-term federal welfare payments to the unemployed provide any form of significant economic stimulus.

The money would be better spent hiring the unemployed to perform actual work that provides a return on investment.

Posted by: pilsener | July 2, 2010 1:46 PM | Report abuse

Thanks, Ryan. I had thought that I recalled a previous post that discussed this topic, but I could not find it. Maybe one day WaPo can add a search tool for the blog archives.

Thanks also to Kevin_Willis for inspiring me to pose the question about the data on this issue.

Posted by: Patrick_M | July 2, 2010 2:08 PM | Report abuse

If Zandi is correct about the multiplier for extended unemployment benefits, which are direct transfer payments, bring back CETA. More people would support paying people to work (except Republicans who would consider it government employment) however marginal the return, rather than paying them to be idle through extended unemployment 99+ weeks.

Posted by: tuber | July 2, 2010 2:15 PM | Report abuse

@ pilsener :does the economic benefits of doing so outweigh the negative aspects of inflation, heavy interest costs, and dislocation of market economics.

1) inflation is basically 0 right now or very low so UI benefits are not going to ignite a noticeable inflation increase.

2) If the government has to borrow, why not do it at historically low rates like we have now? Why shouldn't the govt take advantage of the time value of that money to get the economy going (or at least keep it from slowing down)? Its not like govt borrowing is crowding out the private sector's ability to borrow. The fed discount window is still virtually giving money away with no interest...

3) I am not sure what "dislocation of market economics" extending UI will have given the historically high unemployment rates we have now. Is the average <$300 weekly benefit really keeping people from looking for work or accepting a position that opens up? (Remember their are 6-9 unemployed people for each job right now.) Even an $8/hr job pays more than that.

Posted by: srw3 | July 2, 2010 2:18 PM | Report abuse

New question: Is there info comparing US vs Germany on: Manufacturing % of economy. Have companies in Germany been outsourcing their manufacturing to China? Why or why not?

Posted by: donhalljobs | July 2, 2010 2:25 PM | Report abuse

pilsener,

1. All of the money allocated is not being funded on the basis of long-term debt, because a large share of the funds comes directly back into the treasury in the form of tax revenue. To the extent that the spending off-sets increased job losses through its stimulative impact on the economy, it has multiple secondary benefits as well that off-set future outlays on social service spending.

Under normal conditions with a robust private sector expansion a person could make a legitimate case against extending the support. Under the current set of economic conditions, opposing these kind of measures is self-defeating -- it's cutting off the nose to spite the face. The idea seems to contain the implied premise that increasing the number of job applicants increases the overall number of jobs, which on its face is an outlandish idea.

2. Can borrowing pay for itself over time? Of course, this is one of those "it depends" type questions.

Right now there's almost zero risk of crowding out private spending or capacity, in part due to the ability of the federal government to borrow at low rates (2 to 3 percent over 30 years) and because of high rates of unemployment. Some forms of infrastructure development and R&D spending could very well pay for themselves over a period of years. In the case of social service spending, a portion of the debt will be on the books, but I see this as ignoring the likely social harm caused by punishing people simply for getting laid off in an environment where people aren't hiring. It would be poetic justice, if every person who lost unemployment insurance supplemented the short-fall -- and found ways to support themselves and their families by creating a vast black-market of stolen goods, drugs, and crime in conservative districts. It would be even greater poetic justice if the added enforcement costs bankrupted those conservative districts.

Posted by: JPRS | July 2, 2010 2:28 PM | Report abuse

Obviously, according to Zandi and Klein, the best way out of the recession is to pay people not to work.

At some point the "wonkery" veers off into utter idiocy. Klein et al have no reference points other than the echoes of their own blather.

Posted by: msoja | July 2, 2010 2:34 PM | Report abuse

"Using the most recent estimate of the size of the labor force, a 0.4 oercent increase in the unemployment rate represents 614,964 people. This is not a trivial number, but losing the stimulative effect of unemployment benefits would increase the unemployment rate as well, likely canceling out this effect."

Canceling out the effect. Doesn't sound like stimulus.

I appreciate the study and all, but the results require a lot of conjecture. Why not just look at what people actually do when unemployment benefits expire? That's about as apples to apples as you can get. When that was done in the early 1980s for Pittsburgh, the result was 34% of those with expiring benefits immediately found a job.

This study compares people who quit their jobs without new work lined up in 2006 to people who did so in 2009Q1 or thereabouts. What are the relative propensities to find work between these two groups? We have no data, but one would suspect the motivation to find work somewhat diminished for the latter group. After all, people who really need to hold down a job would be unlikely to quit when 'Great Depression II' was in the headlines. New entrants could go either way. Some very qualified people who could find a job quickly if they tried went to grad school. Other people who wouldn't be able to easily find a job probably also went to grad school. A stay at home spouse might have been forced into the labor market. Anyway, the point stands that job quitters/new entrants aren't the best control, since the composition of these people has certainly changed from 2006-2007 to 2009.

How exactly is the 'expected unemployment duration' calculated? It's considered more accurate although it seems one of the authors generated the measure itself. We aren't concerned about the typical experience. The presumption is that most people look hard to find a job and on the margin - 10% to 20% of the unemployed - are passing up the occassional low paying job. The average person's experience isn't typical because the average person doesn't want to sit on unemployment. We care about the guy who seems a burger flipping job at 51 weeks of unemployment, and then decides not to bother with that job when Congress passes an extension.

Another point to consider is that unemployment benefits themselves already extend unemployment. The 0.4% the authors note would be on top of existing discouragement. It's entirely possible that the discouragement of the original 26 weeks of unemployment fell from 2006-2007 to 2009, which means the 1.6 weeks increase they estimated was understated.

"The Center for Budget and Policy Priorities looked at the impact on poverty of the extension and found that it saved a total of 800,000 people from falling below the poverty line."

Sure. This is why I support safety nets. Stimulus seems minimal at best - canceled out, as Dylan put it - by a decrease in labor supply.

Posted by: justin84 | July 2, 2010 2:51 PM | Report abuse

Ezra Klein writes
"It is sometimes said that extending benefits for too long causes workers to become less motivated to look for jobs, which keeps the unemployment rate high and hurts the economic recovery."

It should also be pointed out that the above claim relies on jobs being available. As long as jobs are difficult to find, paying displaced workers unemployment is a necessary step to keeping cash flowing through the economy. If jobs are plentiful & lazy bums are kickin' it on unemployment because they can, sure, cut off the benefits. That is not where we are today.

Posted by: bsimon1 | July 2, 2010 3:02 PM | Report abuse

@srw3:
Is the average <$300 weekly benefit really keeping people from looking for work or accepting a position that opens up?

According to the rules when i got unemployment compensation in 1985, you had to prove you applied for work at x no. of places per week, and if offered a job you had to accept it. If you turned it down, you lost your benefits.

Posted by: rjewett | July 2, 2010 3:05 PM | Report abuse

"1) inflation is basically 0 right now or very low so UI benefits are not going to ignite a noticeable inflation increase."

The Fed controls monetary policy. UI benefits will never cause inflation unless the Fed wants them to. But yes, inflation worries due to UI extensions are misguided. That inflation results from fiscal stimulus is a fairly Keynesian idea.

"2) If the government has to borrow, why not do it at historically low rates like we have now? Why shouldn't the govt take advantage of the time value of that money to get the economy going (or at least keep it from slowing down)? Its not like govt borrowing is crowding out the private sector's ability to borrow. The fed discount window is still virtually giving money away with no interest..."

The rates are low now, but we're nervous about what the rates will be as we roll this debt over. In 2020 when we're sitting around with $20 trillion+ in debt, we'll be less than thrilled if rates end up at 6% and we're spending $1.2 trillion on interest payments.

"3) I am not sure what "dislocation of market economics" extending UI will have given the historically high unemployment rates we have now. Is the average $2.60/hr.

The study above finds 600,000 people avoiding low paying jobs and increasing unemployment. The FOMC believes 1% of the labor force is facing this issue, or 1,500,000. A study in Pittsburgh in the depressed early '80s economy found 34% of people who were on unemployment found jobs immediately after benefit expiration - somehow one expects there wasn't a surge of job creation that was lacking in the prior week.

Posted by: justin84 | July 2, 2010 3:21 PM | Report abuse

"According to the rules when i got unemployment compensation in 1985, you had to prove you applied for work at x no. of places per week, and if offered a job you had to accept it. If you turned it down, you lost your benefits."

I believe the same rules still apply. Let's say you made $38,000/yr and are now on unemployment. Do you actually apply at Burger King - where you wouldn't make anymore money than on UI - or do you apply for $35,000+ jobs? If you have 99 weeks to wait, there's no need to rush and go for the $15,000-$25,000/yr jobs. What if you actually get hired for the $15,000/yr job?

Posted by: justin84 | July 2, 2010 3:28 PM | Report abuse

Obviously, according to Zandi and Klein, the best way out of the recession is to pay people not to work.

At some point the "wonkery" veers off into utter idiocy. Klein et al have no reference points other than the echoes of their own blather.

Posted by: msoja

/////////////////////////////

"Utter idiocy" is probably a more accurate description of your recharacterization of Klein and Zandi's ideas.

The data itself doesn't even support your mischaracterization.

Posted by: JPRS | July 2, 2010 3:28 PM | Report abuse

"A study in Pittsburgh in the depressed early '80s economy found 34% of people who were on unemployment found jobs immediately after benefit expiration - somehow one expects there wasn't a surge of job creation that was lacking in the prior week."

Meaning (in Pittsburgh thirty years ago) that 66% were left with no job and no benefits. And that the jobs taken by the 34% simply crowded out an equal number of shorter term unemployed who would otherwise have filled those openings. So no change in the overall picture of numbers of jobs to the number of job seekers, the effect in the end is only on the 66% left without any job and without their insurance benefit to help them soldier on in the search.

Does the Pittsburgh study tell us their fate? Or the cost to the taxpayers when families lose income entirely, leading to foreclosures, bankruptcy filings, greater pressure on welfare and relief services?

A different view:

http://www.tnr.com/blog/jonathan-cohn/76001/myth-the-day-benefits-make-people-lazy

As Hart points out, we'll soon have a large fresh sample with which to test these theories:

"But, hey, we’re about to get something like a real-world test of [Sharron] Angle’s theory. Thanks to the Republicans and Democrat Ben Nelson, hundreds of thousands of people will lose their unemployment benefits in the next few weeks. If she’s right, a bunch of them will magically find jobs just as the benefits run out. Bets, anybody?"

Posted by: Patrick_M | July 2, 2010 3:41 PM | Report abuse

justin84,

It would be interesting to see what the contours are from the early 1980s study, however, I suspect "apples-to-apples" it probably wasn't.

e.g. The 1981-82 recession was largely a by-product of Fed policy; this recession like the one that hit in the Great Depression is due to the implosion of a massive private sector debt bubble. Different causes, different cures.

e.g. a person who had unemployment benefits canceled anytime from Jan. 1983 forward was caught up in a robust private sector expansion. Right now there isn't much evidence of that happening.

Posted by: JPRS | July 2, 2010 3:54 PM | Report abuse

"I appreciate the study and all, but the results require a lot of conjecture. Why not just look at what people actually do when unemployment benefits expire? That's about as apples to apples as you can get. When that was done in the early 1980s for Pittsburgh, the result was 34% of those with expiring benefits immediately found a job."

You mean when it comes down to starving or taking a crummy job people go for the latter? This is shocking!

Anyone that argues that UI increases unemployment duration needs to look at the pre-recession line where it clearly shows that people on UI get back into a job faster than those with UI.

Now it would be nice of quitters and new entrants were split. One would expect the former to have more secure finances if they are willing to quit and therefore able to stay unemployed for longer.

However, considering we are in a recession, I suspect that the those not covered by UI are composed mainly of new entrants and I would really doubt that the composition of new entrants and job losers is very different. As such, the fact that the lines are quite close together now suggests that UI is not discouraging people from finding a job.

Posted by: awcarr | July 2, 2010 4:08 PM | Report abuse

That should read "people on UI get back into a job faster than those without UI."

Posted by: awcarr | July 2, 2010 4:10 PM | Report abuse

"It would be interesting to see what the contours are from the early 1980s study, however, I suspect "apples-to-apples" it probably wasn't."

Apples to apples means you are comparing people who had unemployment insurance one week to the very same individuals who don't have it the following week. This contrasts with comparing group A to group B and then group C to group D, depending on group A = group C and group B = group D. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1539491

"e.g. The 1981-82 recession was largely a by-product of Fed policy; this recession like the one that hit in the Great Depression is due to the implosion of a massive private sector debt bubble. Different causes, different cures."

How does the cause of recession make a difference? If unemployment is above 10%, the unemployed person is facing a horrible job market no matter the cause. In Pittsburgh in the early 1980s, it hit 16% and was above 10% for nearly three years. In other words, at one point it was worse than Nevada's labor market now.

In any case, there is some evidence that the 2008 recession was itself caused primarily by tight monetary policy. The financial panic triggered a surge in money demand that the Fed failed to accomodate.
http://www.themoneyillusion.com/?p=249

"e.g. a person who had unemployment benefits canceled anytime from Jan. 1983 forward was caught up in a robust private sector expansion. Right now there isn't much evidence of that happening."

The unemployment rate on January 1983 was 10.4%. It was above 8% until February 1984. The data series in the Pittsburgh study ended in the summer of 1984, and remember Pittsburgh had unemployment about 5% higher than the rest of the nation. I really don't think you can claim that Pittsburgh had a more robust labor market than today - the evidence is that it was just a little worse, but far worse.

Posted by: justin84 | July 2, 2010 4:42 PM | Report abuse

rjewett, you are correct. That was my experience the 1 time I was on UI. I didn't have to go to the office, but I had to document the jobs I applied for and turn the list in with contact info.

Posted by: srw3 | July 2, 2010 4:52 PM | Report abuse

"And that the jobs taken by the 34% simply crowded out an equal number of shorter term unemployed who would otherwise have filled those openings."

There aren't a fixed number of jobs. A UI payment is a transfer. Instead of Bob spending the money, Jill does. But if Jill gets a job, she creates her own wealth and spends money, and now demand exists to support Tom.

"A different view:

http://www.tnr.com/blog/jonathan-cohn/76001/myth-the-day-benefits-make-people-lazy"

The article Jonathan cites must have overlooked the 1998 paper I have cited. In the 1998 paper, the authors state the problem the 2007 paper identified, and noted that they were able to use wage records of individuals to determine if they had returned to work or not. So the Pittsburgh study still stands. It didn't have to rely on the unemployed reporting their own situation, as it had access to third party records.

As it stands, I note that people are trying to make conservatives/economists look mean by calling the unemployed lazy. All conservatives/economists are saying is that while the vast majority (80-90%) can't find a job, a small percentage is avoiding available work because it doesn't pay. They're not lazy, they're rational.

"You mean when it comes down to starving or taking a crummy job people go for the latter? This is shocking!"

This is the point. It is not shocking. All I am saying as is that while UI benefits help a lot of people, they aren't a strong stimulus because some of the crummy jobs don't get filled, meaning less employment and output.

"Anyone that argues that UI increases unemployment duration needs to look at the pre-recession line where it clearly shows that people on UI get back into a job faster than those with UI."

These are different types of people. You can't compare someone who was involuntarily severed in a layoff with someone who either quit a job without a new one being lined up or new entrants to the labor force (usually young and often less experienced). That's why the best studies look at the same individuals.

I'm not saying cancel UI. I think something needs to be done to ensure that it gets to the people who NEED it, and that people who really NEED it don't see their benefits cut off from political horsetrading.

"However, considering we are in a recession, I suspect that the those not covered by UI are composed mainly of new entrants and I would really doubt that the composition of new entrants and job losers is very different. As such, the fact that the lines are quite close together now suggests that UI is not discouraging people from finding a job."

Again, these are different types of people. The new entrants of today are different than the ones of 4 years ago. The unemployed new entrants might be the ones who can't get into grad school, and so are more likely to have longer job searches. But we can't tell from the data. That's why you need to compare the same people over time.

Posted by: justin84 | July 2, 2010 4:55 PM | Report abuse

@j84: That inflation results from fiscal stimulus is a fairly Keynesian idea.

It depends if the fiscal stimulus happens during an expansion or during a recession.

Posted by: srw3 | July 2, 2010 5:15 PM | Report abuse

@j84: not to pick on you but isn't this just a tad elitist?

New entrants could go either way. Some very qualified people who could find a job quickly if they tried went to grad school. Other people who wouldn't be able to easily find a job probably also went to grad school. A stay at home spouse might have been forced into the labor market.

Assuming that even a plurality of new entrants could just go to grad school (and not be simultaneously looking for a job to pay for it) if they thought the job market is bad.

Most middle class women work already, btw, and even more lower middle class, poor and near poor women work if they can find it, kids or no.

Posted by: srw3 | July 2, 2010 5:20 PM | Report abuse

correction
...is bad, doesn't reflect reality....

comments eated it...

Posted by: srw3 | July 2, 2010 5:30 PM | Report abuse

Hey, I'm quite with Patrick_M. Quite a few commentators on this page hew to idea that, with 10% unemployment, a substantial number of job-seekers could find work if they really, really, wanted it. And a substantial number of these people are going to lose their unemployment benefits in the next few months.

So, happy days! If people like justin84 are right, we're about to see a huge employment surge and an uptick in private sector hiring.

Of course, if there is a massive aversion to hiring in the private sector, and these people are looking for jobs, but not able to locate them, we should see an unemployment number that barely blinks an eye. I wonder who will be right?

Posted by: strawman | July 2, 2010 5:54 PM | Report abuse

"There aren't a fixed number of jobs. A UI payment is a transfer. Instead of Bob spending the money, Jill does. But if Jill gets a job, she creates her own wealth and spends money, and now demand exists to support Tom."

justin84,

We agree that demand in the private sector creates jobs. So growth in demand leads to a growth in job opportunities, and that leads to reduced unemployment, and all of that is a happy upward spiral.

However, when job growth is still only at or near the pace of population growth, the idea that there is not a "fixed" number of jobs is not germaine. In the current climate, what few new jobs exist all will get filled by unemployed people, so even if your long-term unemployed CEO takes a fast food job as his or her benefits are about to expire, that just means the same opportunity is being denied to some other unemployed individual. Whichever unemployed person takes the newly created job, demand will grow, and that's good, but it does not change the overall picture...as many unemployed persons are still left over after that job is filled with either person, and they will ompete for as few other opportunities as would have existed no matter which of the unemployed persons the employer hired.

Meanwhile (using your Pittsburgh numbers) for every person who finds such a job, two others don't, and those two create a drag on the economy if their benefits are allowed to expire. They don't contribute to demand (at all), their ability to effectively hunt for work is drastically reduced, and they make a hard landing in other parts of the safety net, leading to even greater taxpayer "transfers" than if the benefits had been extended.

I don't think I have said that conservative economists regard the unemployed as "lazy," but Hart (not Jonathan Cohn) did I think rightly characterize Sharron Angle's "spoiled" remarks to mean just that, and certain comments on the various threads on Ezra's blog this week have also indicated similar sentiments, and a theory that blames unemployment on the unemployed, which to me is most ill-considered and (yes) "mean."

I always find your analysis to be interesting, and I marvel at how quickly and how frequently you are able to post a reasoned conservative rebuttal. A holiday weekend is upon us, I think we've debated this depressing subject about as much as needed across several threads, and so I'll leave it there and just wish you a happy holiday, celebrating America's birthday. We all want the same things: a robust economy with full employment, so while we may differ on policy, we share the same basic goals.

-Happy 4th of July-

Posted by: Patrick_M | July 2, 2010 6:07 PM | Report abuse

justin84 says:
"I believe the same rules still apply. Let's say you made $38,000/yr and are now on unemployment. Do you actually apply at Burger King - where you wouldn't make anymore money than on UI - or do you apply for $35,000+ jobs? "

This is only a good thing if you assume it's a net benefit to our economy for someone with a 38k/year job to be working at Burger King. The result will be this person working long hours at a low-wage job to make ends meet, impairing their ability to find a job more appropriate to their skills when one becomes available.

Posted by: btavshanjian | July 2, 2010 7:12 PM | Report abuse

...back to my first comment:

meant to say thanks Dylan!

& happy 4th, too!

Posted by: Patrick_M | July 2, 2010 7:13 PM | Report abuse

This, of course, is not even accounting for the fact that it's rare for minimum-wage job places to hire people so obviously overqualified for the job. They're rightly concerned that "you're just going to go for the better job when one opens up and leave me in the lurch!"

Posted by: btavshanjian | July 2, 2010 7:15 PM | Report abuse

--"The data itself doesn't even support your mischaracterization."--

The data? If you can find Zandi's "data", post it.

Posted by: msoja | July 2, 2010 8:29 PM | Report abuse

Why does everyone hold this misconception that the Unemployed are eligible for/entitled to 99 weeks of EUI?? They get 26 weeks of state benefits - that's it!
Those who are out to 99 weeks, lost their jobs earlier along the current recession's timeline and were given the "grace" of Congressional extensions, because the jobs still are not there. Many jobless lost their sources of income much later along this recession's timeline, putting them outside of eligibility for EUI tiers, simply because their original 26 weeks ended AFTER the deadline to qualify for the next tier.

Reality is that more people are being turned away from jobs, than are turning down jobs. The current situaion leaves them just a few choices:
1. Starvation & homelessness.
2. Apply for Welfare & hope they at least qualify for that. (No guarantees there either.)
3. Hope that Congress legislates another extension.
4. Armed robbery & perdition.
Which would you have them choose?

At the very least - with EUI - some part of mortgage/rent is being paid, utiliies & public resources are being paid, grocery stores are selling goods for cash; commerce is happening & money is flowing, not stagnating in the pockets of jobless persons. Ultimately, the economy is benefitting from those dollars.

Posted by: lunag | July 2, 2010 9:01 PM | Report abuse

A further postcript (relating to Justin84's 1980's study):

http://www.cepr.net/documents/publications/ur-2010-07.pdf

A depressing portrait, I know, sorry for more gloomy analysis, but I thought this one would be of interest to anyone who comes upon this discussion over the weekend.

Again, a happy and restful summer holiday weekend to all.

Posted by: Patrick_M | July 2, 2010 9:11 PM | Report abuse

@justin84,

The cause of the recession is significant, because it provides a clue regarding the sources of contraction, the cure, and the duration of the contraction.

In the early 1980s the Fed jacked up short term rates to 20 percent at one-point. The consequence of the increase is that it raised the cost of borrowing serving as a temporary disincentive for businesses and individuals to finance growth on the basis of debt (something that's done all the time -- very few companies will finance an expansion of operations based purely using current capital reserves).

So, when the Fed began slowly decreasing interest rates to a level that was more consistent with historical norms -- combined now with a low rate of inflation -- it had the effect of serving as a massive stimulus. Sometimes you can use monetary policy alone to stimulate an economic recovery.

This recession is different, because of the massive levels of private sector debt (this recession is different to such a degree that even with the Fed's short term rate at close to zero we were still bleeding jobs at a high rate until private firms were able to off-load inventories and the government intervened with a robust fiscal intervention).

Consumers and firms need to off-load debt first before a robust private sector recovery takes place.

These charts puts those debt levels into context (e.g. 1980 private sector debt 130 percent of GDP, 2009 the rate stands at 280).

http://www.scribd.com/doc/13869426/Plan-Orange-All-Private-Sector-Debt-chart

https://customers.reuters.com/d/graphics/USDEBT2.pdf

If growth rates in the U.S. were in the robust high single digits, we could bring the balance sheets into alignment quickly. Unfortunately, that's unlikely to happen anytime soon (barring a revolutionary new technology which increases efficiency across the economy reducing costs to core industries).

The unemployment rate in the early 1980s dropped 2.5 percent over the span of a year (a significant rate of decline from Dec. 1982 -- the peak -- to Dec. 1983). Under those conditions a person in Pittsburgh who couldn't find work locally might have a chance of finding it elsewhere. GDP growth was robust from 1983-1985 averaging over 5 percent a year.

If we were seeing indications of a robust recovery right around the corner, I could see a stronger argument for withdrawing federal support on UI in the hope that those who are willing and able would be able to find work quickly. That isn't going to happen any time soon without additional stimulus spending. We know that in part because this recession has more resemblance to Japan's lost decade (another balance sheet recession), the Great Depression than more recent recessions, where it was possible to restore growth largely through the use of monetary policy.

Posted by: JPRS | July 2, 2010 10:32 PM | Report abuse

Reading through your comments, it is evident that you are all extremely educated individuals. I am an unemployed American for the first time in my life. I live in the state of Connecticut and because the unemployment extention has not yet passed, I have 12 weeks left to collect unemployment benefits. In my state, as an administrative assistant, there are approximately (this is being very fair) 200 or more applicants to compete against. While you all debate the true value of unemployment benefits, I cannot sleep. I peruse the job sites daily, network with friends, send out my resume and my recommendation letter. I am single. There is no other income in my household to tide me over. My savings is gone. I am 56 years old.

Perhaps I am incorrect... but it seems to me that the unemployment rate will improve soon, as millions of people lose their ability to collect. The statistics will be skewed because there is no way to count those of us that are still unemployed but no longer in "the system."

The argument that there are some who are waiting for their compensation to end before finding employment astounds me. Perhaps there are some among us that are in that fortunate position. I am not. I want to work. Period. I want to be self-sustaining.

Not extending federal unemployment benefits is adding to the welfare rolls and to the homeless. I am still trying to wrap my mind around those possibilities for myself.

Posted by: Pamiam1954 | July 3, 2010 12:57 AM | Report abuse

--"There is no other income in my household to tide me over. My savings is gone. I am 56 years old."--

Not to worry! The teachers (the most productive members of society) in your state are still on the job with bennies few will ever even dream of. Try not to think of how much of the fruit of your own labor is keeping them in the style to which they've grown accustomed. Nor of the money you've sent off to the feds so that mid-Western politicians could buy the corn vote. Etc.

Posted by: msoja | July 3, 2010 8:35 AM | Report abuse

Still waiting for Klein or Matthews or Zandi to present a legitimate explanation of how the $1.61 figure was derived. Klein has been using the (as far as I can tell) unsubstantiated claim to buttress several otherwise thin posts, but as far as I've been able to determine, Zandi pulled the figure out of the magic hat that does so dazzle the rubes.

Posted by: msoja | July 3, 2010 8:54 AM | Report abuse

A good explanation of Zandi's multiplier is posted at:

http://www.econbrowser.com/archives/2008/10/pocketfull_of_m.html

The "rubes" strike me as those who think that reducing aggregate demand via austerity measures stimulates job creation and growth in the current economic environment.

If there was evidence of crowding out of private investment, a stronger argument could be made against the use of fiscal stimulus. Under the current conditions though it strikes me that a person would have to believe in magical thinking in order to believe that a reduction in AD is likely to provide an incentive for hiring and new growth. Given the experience of the late Hoover years and Japan in 1997, it seems more likely that it will increase deficits based on lost sources of revenue; it will prolong the economic slump and reduce the prospects of future growth.

Posted by: JPRS | July 3, 2010 8:40 PM | Report abuse

Thank you, JPRS.

It will take me a little bit to absorb that, but I notice right off that the formula for the multiplier has two variables: the propensity to spend, and the tax rate. The first is arrived at, as far as I can tell, somewhat subjectively, as (links to links) the authors talk about their factor as being "plausible" and "conservative".

Surprisingly, after the propensity to spend is decided upon and plugged in, the only variable in the multiplier calculation is the recipient's tax rate.

The main reason giving stolen loot to poor people has such a high multiplier is that their tax rate is figured as zero. And yet, the two times I've noticed Klein citing Zandi it has been in the context of the government recouping its expenditures in these high multiplier areas via the tax code.

http://voices.washingtonpost.com/ezra-klein/2010/06/stimulus_isnt_free.html
http://voices.washingtonpost.com/ezra-klein/2010/07/two_stimulus_talking_points_th.html

Obviously, Klein is completely unaware of the methodology behind the charts he cites. There is no 25% to 33% rebate to the government for the $1.61 its one dollar in food stamps ostensibly (I still think the figure is fudged) generates. The initial wealth transfer accrues no taxes whatsoever. That assumption is built into Zandi's calculations that give the $1.61 figure. If one plugs in a tax rate other than zero, no $1.61.

So, Zandi has a formula, after all, but it has limited inputs, and I'm not entirely sure it is apt as presented.

Klein is a complete fraud, as usual. I think tomorrow I'm going to have to write this up a little more formally.

Posted by: msoja | July 4, 2010 12:30 AM | Report abuse

--"The 'rubes' strike me as those who think that reducing aggregate demand via austerity measures stimulates job creation and growth in the current economic environment."--

I would never make that contention. I don't care whether government austerity measures stimulate Wall Street or Nancy Pelosi. The government ought to be austere, period. It ought to be austere when times are good. It ought to be austere when times are bad. It ought to be austere when times are middling.

"Government" is not a solution for any of the day to day problems of free individuals. Government, in its modern incarnation, is an absolute hindrance to solving problems encountered by our varied citizenry. Witness the Gulf oil spill. What a flaking joke. The Jones Act? The thousand other bureaucratic hurdles? The plethora of stupid agencies all trying to justify their existences and cost?

It's all rot. The whole question is rot. Vile stinking rot.

Posted by: msoja | July 4, 2010 12:52 AM | Report abuse

Let's just put everyone on unemployment benefits. Think how that would stimulate the economy.

Posted by: groovercg | July 4, 2010 1:35 PM | Report abuse

msoja,

Unemployment insurance isn't "stolen loot". While an employer may effectively pay the insurance fee in the case of the first tier of benefits that money in real terms either comes from reduced wages for workers, or higher prices for consumers. In the case of additional supplements these are paid for in the form of future taxes -- which many of these laid off workers will likely have to pay if the economy starts generating robust net-job growth.

Your claim is a little like saying that any other form of social insurance -- whether we're talking about health, or car, or life insurance, or social security -- is "stolen" simply because a person ends up in a situation where they need to redeem the insurance.

What's more who exactly is eligible for the insurance? It's not ALL people who are unemployed.

It's typically not workers who decide to quit, or temporary workers.

The lion's share of benefits go to full-time workers who get fired due to cost cutting by businesses. In many cases businesses are cutting back due to the fallout from the financial crises -- of which many of these workers are merely collateral damage. They did not profit from the excesses, they did not create the policies that allowed for financial sector looting, these are largely people who through no fault of their own are bearing the consequences of events that were not of their making. Their "compensation" is basically a pittance which does nothing to mitigate against the uncertainty caused by this crisis.

The reason that the multiplier is so high is not because of the effective tax rate -- it's because most people who get the payouts will SPEND the money because they have to live. The multiplier effects come from the fact that the money that they spend is used by other individuals and businesses to pay for their own activities. (e.g. UI money used to pay for groceries pays for salaries at the grocery store, for the salaries of suppliers who provide goods to the grocery store, etc, which is in turn spent by those economic actors in other areas).

These activities usually are taxed in the form of sales taxes or other taxes. This idea that the only tax that people pay is via "income tax" is an absurd notion. In the case of people who have mortgages they are paying real estate taxes to local jurisdictions, if they have interest payments on loans those are effectively a form of back-door taxation that goes directly to the wealthiest Americans, etc. I suspect a large proportion of those currently receiving unemployment benefits were paying into the income tax system too before they were laid off.

Posted by: JPRS | July 5, 2010 12:45 AM | Report abuse

msoja,

With respect to "austerity" -- I would prefer that the government is SMART and sensible when it comes to policy.

When times are good and the private sector is generating growth, you pay down federal liabilities and get deficits under control.

When times are not good, if there's a mild recession, usually you can use the Fed's short-term rates to lower the cost of borrowing and jump-start economic activity.

When times are really bad, and when the Fed's rates prove to be ineffective, then a simultaneous withdrawal of spending by federal, state, local, and private sector risks creating massive long-term economic harm.

"Austerity" has been done many times before during times of crisis like this one and it has uniformly failed. Given that the cut backs tend to effect those who had the least benefit during the good times, while leaving those in a position of wealth and privilege largely untouched, it is equally IMMORAL. People who see these economic crisis as an opportunity to punish poor, working, and middle class families frankly deserve to go to Hell. They are enemies of the overwhelming majority of Americans.

Posted by: JPRS | July 5, 2010 12:54 AM | Report abuse

"Reality is that more people are being turned away from jobs, than are turning down jobs. The current situaion leaves them just a few choices:
1. Starvation & homelessness.
2. Apply for Welfare & hope they at least qualify for that. (No guarantees there either.)
3. Hope that Congress legislates another extension.
4. Armed robbery & perdition.
Which would you have them choose?"

I'm not sure why this list of 4 options would be considered exhaustive. In particular, the only options are homelessness/starvation or some form of theft (broadly defined). A few I can think of:

5. Go to a family member for charity, or offer to help out around the house for room and board.
6. Go to a friend/neighbor for charity, or offer to help out around the house in exchange for room and board.
7. Get help from a charitable or religious organization.

Libertarians often point to the massive network of charitable groups and fraternal associations back before things like Social Security as to how Americans would respond to those in need if they knew the government wouldn't be there to do the job.

Progressives talk about about how rough life could be in the early 1930s before Social Security, but private charity was limited then to an economy that generated only $6,000 per capita per year. Even a very generous society could not afford to provide much in the way of income support - there was no where near as much discretionary income for most families.

Whether one believes private charity and associations would be able to effectively replace most government programs in terms of the safety net is presumably based on one's view of human nature, and reasonable people can disagree.

I am optimistic that Americans, in the absence of government, would ban together and effectively create a private safety net as they did a hundred years earlier. That said, I would be in agreement with anyone who suggested it a rash idea to abandon the whole safety net, in case such a belief would turn out to be in gross error.

Given that position, I would prefer to reduce as much as possible the negative incentives arising from a public safety net, while preserving the ability of those most in need to receive necessary assistance. Today, we have poor incentives and we still routinely deny help to those who most truly need and, if anyone does, deserve it.

Posted by: justin84 | July 5, 2010 7:39 PM | Report abuse

"@j84: not to pick on you but isn't this just a tad elitist?

New entrants could go either way. Some very qualified people who could find a job quickly if they tried went to grad school. Other people who wouldn't be able to easily find a job probably also went to grad school. A stay at home spouse might have been forced into the labor market."

Sorry. Didn't mean to sound elitist. Never been to grad school myself.

I'm just trying to say that the population of these groups over time isn't necessarily static. There are plausible reasons why the study Dylan cites could be underestimating the effect of UI on reducing employment, and that if possible they should look at what individuals do when they lose their benefits. If only 5% of them find a job right away, then it is difficult to say UI benefits are having much of an effect - if 20%-30% find a job right away, then UI benefits do create a strong disincentive to take certain types of jobs.

Posted by: justin84 | July 5, 2010 8:03 PM | Report abuse

@justin84,

With respect to private charities, on the first level you have problems of coordination. Some catastrophes are just to large and wide spread for a single private charity to accommodate -- even in coordination with other groups.

On the second level there's the problem of what I'd call proximity. Those with the greatest sensitivity to the current problems in the economy tend to be the ones with the least capacity to provide additional support. Those with the greatest capacity (e.g. excess capital) -- are more insulated from the impacts, so there's less sense of urgency.

Additionally, there's the issue of voluntary compliance. This is a problem that we've run into again, and again, and again in so many different areas of public life (e.g. with respect to retiring war debt at the end of the Revolutionary War -- one of the reasons for the adoption of a more coercive, and centralized federal system was the abject failure of a voluntary contribution system based on a weak de-centralized confederation of largely independent states; with the turn of the century you could see voluntary compliance issues connected to the creation of the Federal Reserves check clearing system; Medicare itself was the result of a massive failure on the part of the private sector and private charities to deal with taking care of the elderly).

It's human nature to avoid any sense of social responsibility. It's even more likely that avoidance will take place if a person takes public functions for granted.

Posted by: JPRS | July 5, 2010 11:02 PM | Report abuse

JPRS,
"With respect to private charities, on the first level you have problems of coordination. Some catastrophes are just to large and wide spread for a single private charity to accommodate -- even in coordination with other groups."

I'd argue that private groups working alone and in concert can be as or more effective than government efforts. If I recall, in the aftermath of Hurricane Katrina Wal-Mart did a much better job of getting needy supplies quickly to the victims than did FEMA. You can blame Bush for poor management, but you must design your programs knowing that Bushes sometimes get elected.

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/05/AR2005090501598.html

Now I'm not going to argue that the government always fails, only that I don't think it is correct to assume private organizations can't be just as good or better in terms of disaster response, even for large disasters.

"On the second level there's the problem of what I'd call proximity. Those with the greatest sensitivity to the current problems in the economy tend to be the ones with the least capacity to provide additional support. Those with the greatest capacity (e.g. excess capital) -- are more insulated from the impacts, so there's less sense of urgency."

But the government often has no sense of urgency. Washingon suffers from the same proximity problem. The federal government didn't appear to feel a real sense of urgency regarding Katrina. It has really been unable to do much in the BP situation as well. In terms of economic disaster, the government failed to extend unemployment benefits, which presumably were vital for hundreds of thousands of people.

"Medicare itself was the result of a massive failure on the part of the private sector and private charities to deal with taking care of the elderly."

But there was no discernable impact in the trend for life expectancy among the elderly in the first ten years of Medicare's operation. Medicare seems to have primarily reduced financial risk, but it doesn't seem to have changed seniors' access to effective and necessary healthcare.

http://www.nber.org/digest/apr06/w11609.html

"It's human nature to avoid any sense of social responsibility. It's even more likely that avoidance will take place if a person takes public functions for granted."

I agree. Public charity crowds out private charity. I'm not wholly opposed to public charity. I'm okay with income supports and public hospitals provided they are tied to a strict budget. As I said, I am not willing to gamble people's lives on my convictions as I could easily be wrong. That said, I do believe that private charity should still be a consideration, that there are other options for people than government dependence, and we need to take pains in designing public charity to ensure it fits within a fixed budget and minimizes negative economic incentives.

Posted by: justin84 | July 6, 2010 9:11 AM | Report abuse

@justin84,

It would be interesting to see a 3rd party study of the response to Katrina.

On its face, Wal-Mart's response sounds like it was a drop in the ocean (albeit a significant one in the immediate aftermath for some beneficiaries). After the cameras stopped rolling though, I'd be curious to see what the continuing role was.

Total cost of damage caused by the hurricane was about $200 billion based on estimates that I've been able to glean (or about twice the net-worth of the Walton family).

$20 million was unlikely to be a huge off-set.

As far as the article goes too, the sources are an executive from Wal-Mart, a PR branding consultant in NY, a member of a local Chamber of Commerce, and one local in Jefferson parish. Not exactly a scientific survey.

It's worth noting too that the Catholic Church was hit with over $200 million in damages due to Katrina, so even charities can be hit in a crisis such as this one.

As far as "crowding out" goes, I just don't see this. A person can still get a nice tax write-off for a charitable donation if the person has enough disposable income to spend on charitable giving. The implication I guess is that if we eliminated social security and Medicare and just relied on private donations and a private social safety net that things would be even better, I see as highly unlikely. The existence of the social safety nets is a reaction to a failure on the part of private charities and private giving. If these organizations were up to the task, the public pressure on politicians to create these programs would never have existed.

Some parts of the equation may have changed, but human nature is what it is.

Posted by: JPRS | July 6, 2010 10:45 AM | Report abuse

"Public charity crowds out private charity."

I think using the phrase "public charity" in the contect of the above discussion indicates a genuine difference in mindset.

I see my charitable donations as simple acts of giving. I don't see the extension of unemployment benefits, emergency response efforts by FEMA, a public fire crew putting out a house fire, or a police officer intervening on behalf of a crime victim, as acts of "charity."

There are (of course) strong humanitarian reasons to provide all of these services to individuals who suffer the effects of prolonged economic recession, natural disaster, and other misfortunes outside their personal control. But there are also compelling social and economic utilitarian arguments for providing all of our citizens with the security of these protections.

Posted by: Patrick_M | July 6, 2010 1:37 PM | Report abuse

-should have said "in the context of the above discussion"

-sorry for the gibberish.

Posted by: Patrick_M | July 6, 2010 1:39 PM | Report abuse

"I think using the phrase "public charity" in the contect of the above discussion indicates a genuine difference in mindset.

I see my charitable donations as simple acts of giving. I don't see the extension of unemployment benefits, emergency response efforts by FEMA, a public fire crew putting out a house fire, or a police officer intervening on behalf of a crime victim, as acts of "charity."

Patrick,

Hope you had a good holiday weekend.

I guess all I was trying to say is that it's a lot easier to not help out if you think someone else is going to step up to the plate. Especially if you're paying thousands of dollars a year already through your taxes for someone else to help.

I'd like to reiterate that as interesting as I find the prospect of an entirely private safety net, I'm have not been convinced strongly enough to want to give it a try.

If someone was offering to replace most current non health social spending with a basic income grant for adults and a flat tax (say $12,000 & a 33% rate, not sure if those numbers work), and a system of public hospitals and providers in lieu of Medicaid/Medicare, I'd probably sign up for it. As high as 33% seems, it is probably lower than the implicit marginal tax rate at nearly all levels of income as benefits phase out.

Posted by: justin84 | July 6, 2010 6:26 PM | Report abuse

JRPS,

"On its face, Wal-Mart's response sounds like it was a drop in the ocean (albeit a significant one in the immediate aftermath for some beneficiaries). After the cameras stopped rolling though, I'd be curious to see what the continuing role was."

That's probably true. My primary point here is that a private organization could coordinate a response more effectively than the government, especially in the crucial early hours.

The government takes in trillions of tax dollars that otherwise could be used by private actors - in a country with very limited government presumably private action to fight the crisis would have been far more significant.

In terms of total costs, some of that should have been covered by insurance (and if insurance companies won't provide coverage then you live where you do at your own risk I suppose).

As I mentioned to Patrick, I'm not against public support for those in need. I just not convinced that this assistance is highly stimulative in the context of work disincentives and an inflation targeting central bank.

Posted by: justin84 | July 6, 2010 6:31 PM | Report abuse

JPRS,

"So, when the Fed began slowly decreasing interest rates to a level that was more consistent with historical norms -- combined now with a low rate of inflation -- it had the effect of serving as a massive stimulus. Sometimes you can use monetary policy alone to stimulate an economic recovery."

I'd say you can always use monetary policy alone. Just because the Fed Funds Rate is 25bps doesn't mean the Fed is unable to increase the monetary base.

"If growth rates in the U.S. were in the robust high single digits, we could bring the balance sheets into alignment quickly. Unfortunately, that's unlikely to happen anytime soon (barring a revolutionary new technology which increases efficiency across the economy reducing costs to core industries)."

Sure. I think you need to get the Fed on board to get there from here.

"The unemployment rate in the early 1980s dropped 2.5 percent over the span of a year (a significant rate of decline from Dec. 1982 -- the peak -- to Dec. 1983). Under those conditions a person in Pittsburgh who couldn't find work locally might have a chance of finding it elsewhere. GDP growth was robust from 1983-1985 averaging over 5 percent a year."

No study is perfect. The one I cited ended in the summer of 1984 for lack of data, so for the majority of the time unemployment nationally is above 8%, and for a significant portion of the time it was above the current 9.5% we see today.

Again, I'm only talking about marginal cases, not your typical person's experience. I just think it is difficult to take a job for $20,000/yr when your unemployment benefits are $15,000/yr - the loss of unemployment is effectively a 75% implicit tax on that job, not counting FICA - and some people will respond to those incentives.

As noted above, I'd be okay with a minimum guaranteed income that phased out via flat rate of taxation. Take the $12,000/yr, 33% flat tax system. The $20,000/yr job nets ~$13,400 in after tax income, or $25,400 total. As steep as $6,600 in taxes are for a $20,000/yr job, it still puts the person in much better shape to have a job. Also, while benefits are slightly lower, they don't get cut off by Congress.

Posted by: justin84 | July 6, 2010 6:45 PM | Report abuse

@justin84,

Wal-Mart is probably a special case given it's state of the art, large scale distribution networks -- especially in the south and southeast.

With respect to federal spending and priorities, there are multiple functions that simply can't be outsourced.

e.g. the biggest one being military and national security functions, which account for a huge chunk of federal spending. Regulatory oversight can't be privatized. In the case of Medicare, it actually does outsource things like billing to private firms; the care is provided by private networks outside of the VA system (dollar for dollar the VA system gives taxpayers a solid ROI).

The apples to apples in the case of disasters is not federal spending overall, which encompasses many different functions. The apples to apples is federal spending on disaster relief. Disaster relief funding for 2011 is noted at a little less than $2 billion in the current budget.

With respect to the Great Recession, there is more that could be done with monetary policy in order to reduce borrowing costs and spreads on private leverage (e.g. so far efforts have been focused primarily in the housing sector). However, while additional quantitative easing might help, you still have the 800 lbs. gorilla which is a decrease in aggregate demand. Businesses which are already operating below capacity don't have any incentive to expand capacity when demand for goods and services remains depressed. It's hard to see how you can fix that problem in the near term without robust fiscal stimulus.

With respect to reducing unemployment benefits via a flat tax, this strikes me as another case of cutting off the nose to spite the face under the current conditions. It's true that near-starvation wages are better than no wages, but in terms of the macro impact under current conditions, you're better off with more robust benefits -- even if you reduce their borrowing costs. The end game is getting capital flowing through the private economy so that the private sector is capable of sustaining a recovery on its own. Unemployed workers aren't going to sit on the cash. Reduced benefits might even exacerbate other problems and slow the recovery if it forces people into default on outstanding liabilities.

Posted by: JPRS | July 6, 2010 11:59 PM | Report abuse

--"Unemployment insurance isn't 'stolen loot'. While an employer may effectively pay the insurance fee in the case of the first tier of benefits that money in real terms either comes from reduced wages for workers, or higher prices for consumers."--

So, how is it not stolen? The insurance fee isn't voluntary, I assure you.

Posted by: msoja | July 7, 2010 9:17 PM | Report abuse

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