Apparently, It Doesn’t Take Much to be an Economic Analyst

I’m not a professional economist, but I don’t think you have to be one to see the glaring problem with this argument.

If Congress lets unemployment benefits expire this week, the jobless won’t be the only ones to feel the pain: The overall economy would suffer, too.

Unemployment benefits help drive the economy because the jobless tend to spend every dollar they get, pumping cash into businesses. A cutoff of aid for millions of people jobless for more than six months could squeeze a fragile economy, analysts say. Among the consequences they envision over the next year:

• Annual economic growth could fall by one half to nearly 1 percentage point.

• Up to 1 million more people could lose their jobs.

• Hundreds of thousands would fall into poverty.

“Look for homelessness to rise and food lines to get longer as we approach Christmas if the situation can’t be resolved,” says Diane Swonk, chief economist at Mesirow Financial.

The hole in the argument is that the money to pay for these benefits isn’t conjured from the vasty nothingness of space. Every dollar the government spends on payments to people who aren’t working comes directly from people who could hire them. Thsoe dollars won’t go toward hiring unemployed workers at good wages, which is what really stimulates the economy.

Worse, every dollar the government takes goes back into the economy with a significant bite taken out of it in overhead. I’ve never been able to find a reliable number on how big that bite is, but with two million employees to pay, you can bet Washington isn’t taking a tiny nibble. And that bite doesn’t come right back to the economy. Some of it does, as government employees spend part of their earnings, but I’d guess that’s a very small part of the whole.

Clearly, these economic analysts view unemployment benefits as another government stimulus program. They don’t, however, note that every other stimulus attempt the administration has tried in the past two years has failed. Unemployment now is higher than it was before the Vote Buying Act Stimulus Bill and it’s remained high for far longer than it should have. The economy is virtually flat, with no consequential growth on the horizon. Meanwhile, the Keynesian economic geniuses like these analysts have racked up almost 4 trillion more dollars in debt and ahve absolutely no answer for the new problems they’ve caused beyond “take more money out of the economy and pray that our progressive economic theory will, for the first time in history, succeed”.

That’s foolishness and anyone espousing that particular brand of faith-based government needs to be drummed out of public life as a charlatan who will only hurt out country worse.

Other Posts of Interest:

• Battle of the Obama Economic Advisers
• Let Us Give One Half-Hearted Cheer for The Economic “Healing”
• Joe Biden’s Wacky, Mixed-Up Economic Stimulus Fantasy Land

Tags: Economic Stimulus

Category: The Economy and Your Money