The radical left’s favorite partisan hackonomist, Paul Krugman of the NY Times, had some rather “bizarre” comments about unemployment benefits, as called out in the Wall Street Journal. When discussing the notion that extending unemployment benefits incentivize extended joblessness, Krugman declared:
Today, Democrats and Republicans live in different universes, both intellectually and morally.
Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment.
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But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”
In Mr. Kyl’s view, then, what we really need to worry about right now — with more than five unemployed workers for every job opening, and long-term unemployment at its highest level since the Great Depression — is whether we’re reducing the incentive of the unemployed to find jobs. To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.
But what “textbook” is Krugman referring to? As the WSJ notes:
What does textbook economics have to say about this question? Here is a passage from a textbook called “Macroeconomics“:
Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.
So it turns out that what Krugman calls Sen. Kyl’s “bizarre point of view” is, in fact, textbook economics. The authors of that textbook are Paul Krugman and Robin Wells. Miss Wells is also known as Mrs. Paul Krugman.
Oops.
Bill Lumaye had me on 680 WPTF yesterday afternoon to discuss “The 10 Worst Federal Stimulus Projects in North Carolina.”
To listen to the segment, clicke here.
Just yesterday, I blogged about one of Gov. Perdue’s senior advisers warning that two to three thousand state employee jobs may be cut this year due to another massive budget deficit. I concluded with this comment:
That last line no doubt triggered an emergency alarm at SEANC headquarters.
Those SEANC folks must have given the Governor’s office an earful yesterday. As mentioned in Under the Dome, the Governor’s office has already backtracked and is attempting to spin out of those comments:
A Wilmington Star-News story quoted a senior aide to Gov. Bev Perdue official warning yesterday of 2,000 to 3,000 layoffs of state employees in the next fiscal year. (emphasis mine)
Not so, said Perdue Communications Director Chrissy Pearson. She said Perdue and her chief lobbyist, Andy Willis, both spoke to the N.C. Metropolitan Mayors Coalition meeting in Wilmington and talked about how the state has shed that many jobs over the past year.
“There are no plans to cut state employees,” Pearson said, though she cautioned that the administration is always looking for program efficiencies that could eliminate some jobs.
But let’s re-examine Willis’ comment: “Two thousand to 3,000 employees will probably lose their jobs,” he told the mayors.”
What part of “will probably lose” implies the past tense?
Sounds more like the Governor’s office is desperately trying to appease a powerful lobby. The reality is, with employee payroll & benefits being far and away the largest segment of the state budget (roughly 60-65%); any significant cutbacks will have to include decreasing state employees.
According to Alan Reynolds, senior fellow at the Cato Institute, the federal stimulus actually added about 2 percentage points to the unemployment rate. The jobs the stimulus was claimed to have created or saved can be mostly attributed to extending unemployment benefits and bolstering government programs such as Social Security and Medicaid.
Additionally the 4th quarter GDP report notes that GDP gains were attributed to private and fixed investment and not federal spending.
Yet Gov. Perdue is still calling the stimulus a success that “saved the country from a tremendous catastrophe” and continues to lobby for even more federal money to fund infrastructure and transportation projects.
All the while North Carolina’s unemployment rate continues to increase. According to the North Carolina Employment Security Commission’s latest reports unemployment increased to 11.2 percent in December – an overall 3.2 percent increase in the past year.
Upon celebrating the one-year anniversary of the federal wealth destruction “stimulus” act, the President and VP defended the act with claims of jobs created or saved.
Vice President Biden today delivered a report to the president about the progress of the stimulus. The report states that $453 billion, about 57 percent of the money has been used, but questions remain as to whether that funding has been used wisely.
The Obama administration credits the stimulus with saving or creating two million jobs.
I know what you’re thinking, and lucky for you I have a calculator handy. Using their own estimates, that works out to $226,500 per job “created or saved.” That sounds like North Carolina ABC Commissioner money.
But seriously, the administration’s estimates are meaningless, because government can not create jobs. For a more technical breakdown of why their methodology is useless, see economist Arnold Kling’s discussion.
The folks over at the NC Justice Center offered up a double-whammy this week of self-contradiction. First up, Adam Searing penned this op-ed in the N&O urging Congress to pass some version of health care “reform” (public opinion be damned, of course).
He points out that, under the current, mostly-government run system, “Health insurance has never been more expensive than it is today for individuals, businesses and governments. The growth is unsustainable.”
Yet in the same article, he makes the claim that the reform he advocates for is “No scary ’socialist’ takeover of health care here – just quietly building on the current system.”
So why would he want to build upon the current system he readily admits as being unsustainable?
Moving on, NC Policy Watch discusses the rapid rise in food stamp recipients in North Carolina over the past year, noting “More than 1.2 million people in the state now receive food stamps. That is up 24 percent over a year ago.”
But in a recent post, Policy Watch defended the federal stimulus package, supporting the claims of an area economist.
…money spent on food stamps or unemployment directly stimulates the economy because people almost always spend it. That helps create jobs.
So if spending more money on food stamps “helps create jobs,” and North Carolina saw a jump of 24% in food stamp recipients last year – where are the jobs?
Economist William Anderson dispels a couple of Keynesian fallacies in this excellent piece.
There are many unfortunate legacies of Keynesian “economics,” too many to list in this brief column. However, I concentrate on two of them: the notions that recessions change economic laws and that government borrowing equates to business borrowing.
Both views are championed by Paul Krugman. In The Return of Depression Economics he declares there really is a “free lunch” when the economy implodes and government must open the money spigots to “find it.”
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Confusion exists because during an economic downturn, certain factors and the goods they are used to create no longer are in demand because they are part of a pattern of malinvestment that occurred during the preceding boom. According to Keynesians, an injection of government spending or new money will put those idle factors back into employment– the Keynesian version of the “free lunch.”
As Henry Hazlitt noted in his 1959 classic The Failure of the “New Economics,”these factors are idle for a reason — something the Keynesians ignore because they attribute the situation to a sudden fall in “aggregate demand.” Austrians, on the other hand, believe those factors are unemployed because of malinvestments commenced during the preceding unsustainable boom. In that view, injections of new money only expand the economic distortions instead of “stimulating” the economy.
Econometric aggregates are attractive to arrogant economists and politicians because they serve as the “science” cloak under which they can implement greater control over our economic activity. Unfortunately, such aggregation makes for bad economics and the outcome is policies that not only make us economically worse off but less free.
We first brought you news of the hiring of a “Part-Time Pier Construction Observer” over the summer. This temporary employee has an 11-month contract (July 23, 2009 – June 23, 2010), working 20 hours per week at an hourly rate of $44.03 (roughly $38,000 total). Main duties of this State-funded position include giving guided tours for elected officials and informing stakeholders if a crisis should arise (or if the crane falls down). Essentially, taxpayer funds are being used to have someone sit around and wait for Sen. Basnight show up and want a tour.
Funny, that’s not what I was thinking when legislators argued “job creation” in favor of this project.
The authorizing legislation (House Bill 628) claimed the creation of 555 on-site jobs, yet it seems no more than 30 men are working on an average afternoon.
The Aquariums Division have proposed the creation of 11 full-time year-round pier staff positions including a Pier Manager, Aquarist/Exhibits Tech, Rental & Events Coordinator, Admissions Manager and Housekeeper. Funding of these positions will cost $557,064 according to a drafted budget.
Aquarium officials believe these positions will be funded by revenue from pier walk-ons, fishing passes and equipment rentals. Yet, quick math indicates that the Pier would need at least 153 visitors paying at least the $10 per day average for a fishing pass all 365 days of a year to break-even. Any budget shortfalls will be covered by the Aquarium’s Admissions fund, supported by your tax-dollars.
It’s becoming clear that this $25 million pier will end up costing taxpayers much, much more.
Be sure to check out the live web-cam of construction here.
GMAC just announced it will be closing two offices in Charlotte, eliminating 115 jobs less than a year after their opening. Of course, the majority government-owned GMAC received government subsidies in exchange for their promise to “create” 200 jobs in Charlotte (ah yes, the joys of our “free market”).
Gov. Perdue naturally attempted to gain positive exposure for herself during the exciting “new jobs!” pep rally last year:
Gov. Bev Perdue even came to Charlotte to cheer the company on for bringing jobs that pay nearly $100,000 per year.
No word yet on whether the Gov. will travel to Charlotte to cheer on those 115 folks as they get in line at the unemployment office.
Influencing GMAC’s decision to expand in Charlotte was $4.5 million in bribes incentives from the state and local governments. GMAC posted $5 billion in losses in 2009 fourth quarter alone, so state lawmakers really picked a winner to shower with special breaks – all in the name of “economic development,” of course.
GMAC’s deal, however, pales in comparison with North Carolina’s top ten largest incentive deals.
In our poll this month, we asked voters if Gov. Bev Perdue nicknaming herself as the “Jobs Governor” was an appropriate title for the Governor given her first year in office. Only 12% of voters said yes. 68 percent said no.
As for her favorability rating this month it comes in at a -5 (43% unfavorable, 38% favorable), about the same as it was in December (-5).
Perdue’s numbers have rebounded from her lowest points this summer when the rating was -14. This is mainly through her improved standing among Republicans where her unfavorables have fallen from a high of 72% in October to 56% now. Perdue is now back up at 50% favorable with members of her own party for the first time since April 2009.
Her overall favorability chart below:
Full press release with all the crosstabs here.