Monday, July 12, 2010

Hey GT, Do You Agree with Tom?

GT, to my knowledge, still hasn't explained his vote against extending emergency unemployment  benefits, but Tom Corbett current Pennsylvania Attorney General and Republican nominee for governor recently gave his opinion on extending unemployment.
"The jobs are there. But if we keep extending unemployment, people are just going to sit there," Corbett told Harrisburg radio station WITF at a campaign stop in Elizabethtown. "I've literally had construction companies tell me, 'I can't get people to come back to work until . . . they say, "I'll come back to work when unemployment runs out." ' "
Let's leave aside the anecdotal nature of Tom's evidence and ask, does Tom have a point,  is there any real evidence that extending unemployment insurance in the current economic environment  contributes to unemployment?  The answer is yes, but the effect is not very big and it effect is offset by larger and more important ones.

According to a recent paper (via Ezra Klein) by two economists at the Federal reserve bank of San Francisco, Rob Valletta and Katherine Kaung,
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%.
Ezra notes that "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, you knew there had to be a but, there is another thing to be considered here, the stimulative effect of unemployment benefits. Once again I give you Ezra,
With that process,  [Moody's economist Mark] 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.
Let's put this on the scales. On the on side, extending unemployment insurance leads 614,964 people to remain unemployed about 1.6 weeks longer. On the other side, extending unemployment insurance each dollar spent on extending unemployment insurance generates $1.61 in economic growth and the extensions have prevented 800,000 people from fall below the poverty line.  I'd have to say the the scales tip overwhelmingly in favor of extending unemployment benefits in the current economic climate.

But Tom would rather play the resentment card. He wants to stir up Teabaggers with this pleasing tale,  "I've literally had construction companies tell me, 'I can't get people to come back to work until . . . they say, "I'll come back to work when unemployment runs out.' "

So GT, do you agree with Tom? Did you vote against  extending unemployment because you think your unemployed constituents are lazy?   Your constituents, employed and unemployed alike,  want to know what you really are thinking.  You are thinking aren't you?

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