Friday, August 19, 2011

Stupid WSJ Editorial

I was reading the Wall Street Journal editorials this morning, and thought an article was particularly interesting. That's not unusual, the WSJ op-ed page is always, if nothing else, an interesting read. It usually reads like something you'd expect from some secret Fox News/GOP cabal, echoing the talking points of Republican leadership and falling over itself trying to be as "pro-business" as possible. So, let's not pretend like I'm a completely unbiased reader. But, with that said, I like to think I give almost all the articles a chance to persuade me (except for Karl Rove's, I mean, really?) But this morning there was an article from Stephen Moore that struck me as particularly callous and ridiculous. The particular passage I found distasteful came in the first section, where Moore disputes the 'nonsensical' notion that unemployment benefits will lead to more consumption and therefore, indirectly, more jobs (emphasis mine). Mr. Carney explained that unemployment insurance "is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring." That's a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this. I have two teenage sons. One worked all summer and the other sat on his duff. To stimulate the economy, the White House wants to take more money from the son who works and give it to the one who doesn't work. I can say with 100% certainty as a parent that in the Moore household this will lead to less work. Now, I understand if you want to argue on the idea that increasing unemployment benefits doesn't immediately boost consumption (but I'm pretty sure you'll be wrong), and I also get the point that you might not agree with the idea that additional consumption spurred by those benefits will result in more hiring (though again, I would disagree), but to use your own teenage kids as demonstrative of why unemployment benefits are ridiculous seems a tad absurd. I agree with Mr. Moore that his upper-middle class teenager would take free money and continue not to work. My guess is he'll continue to get fed and have a place to live and play Xbox long after that free ride ended. But to compare the plight of the unemployed to a kid on summer vacation and say, 'See! People who get free money will just sit around and live like Kings among men!'. Well, as I said, seems a bit callous. It also doesn't seem like it would be true.
The chart below is from a study which evaluates the time people spend looking for jobs relative to the duration of their unemployment benefits. If Moore is correct, people would spend no time looking for work until benefits run out (because it's free money!). But that doesn't seem to be the case, except maybe for Moore's punk kid.


Consultant Ninja said...

A friend of the family is a MBA graduate, management consultant (contract based). After his contract ran out, he filed for unemployment.

He's now planning a world travel tour.

He rationalized it by mentioning a laid-off trader friend of his who is collecting unemployment, and is
doing day-trading.

the analogy still works, albiet for rich people.

JC said...

Of course it's possible for the analogy to work. There are clearly examples of people who take advantage of the system (like those money grubbing MBAs!)

I would argue that's far more likely to be the exception rather than the rule.

I don't know that MOST unemployment recipients take around the world tours, pop bottles of Dom, or construct an elaborate rocket sled. I think most probably try to keep their kids fed

hobiewon said...

Hi Jared,

My opinion on unemployment benefits, which is essentially my opinion on many economic ideas, is:

I totally support unemployment benefits, I think they are necessary for many reasons.

However : I think unemployment benefits rank low, compared to other economic programs/supports/stimuli, in their overall benefit to the economy (in terms of creating jobs, growth, etc.). I think many other economic programs/supports/stimuli do a better job spurring job growth and economic growth in general.

With respect to economic issues, for me, it's all about relative economic value coupled with what I believe should (morally, legally, whatever) happen.