Stop Working And Utopia Will Arrive?

12.01.2010
12.03.2010 edit/ update
01.16.2011 repaired broken links
04.04.2012 repaired broken links

Stop Working And Utopia Will Arrive?

original article written by Net Advisor™

AP reported on 11-30-2010 that, “If Congress lets unemployment benefits expire this week for the long-term unemployed…the overall economy would suffer, too.”

Sure, it is sad to hear anyone losing a job. It may be less sad to hear those who may lose unemployment benefits for not working for over 99 weeks (1.9 years); but to say that the “overall economy would suffer” if we don’t extend unemployment benefits beyond 99 weeks is absolutely absurd.

What we have is a function of government creating dependency. Then we have these so called “analysts” and the CBO (Congressional Budget Office) all drinking from the same punch bowl with wild ideas that somehow the American public benefits from having 9%+ unemployment.

“The Congressional Budget Office says every $1 spent on unemployment benefits generates up to $1.90 in economic growth. The program is the most effective government policy for generating growth among 11 options the CBO has analyzed.

Mark Zandi, chief economist at Moody’s Analytics, puts the bang-for-a-buck figure at $1.61, and a recent Labor Department study estimates it at $2.”

— Washington Post (AP Article), 11-30-2010 (PDF)

So if we just pay people not to work, that is supposed going to stimulate the economy? Government and “analysts” claim paying people not to work (unemployment benefits) generates 61% to 100% return on investment. [Math: Rate of Return: $1.00 invested in unemployment claims allegedly brings .61 cents to $1.00 in economic benefit; thus .61 (economic benefit) divided by 100 = 61%; and $1.00 (economic benefit) divided by $1.00 = 100%] depending on whose number one chooses to believe in.

Let us put this in more simple terms.

QUIZ
1. I give you ONE Dollar. How much do you have?
(a) $1.00
(b) $1.61
(c) $1.90
(d) $2.00

Answer is of course, (a), you have $1.00

2. If you spend that $1.00 at the store, gas station, tanning salon or where ever; how much did you give to that retailer?

(a) $1.00
(b) $1.61
(c) $1.90
(d) $2.00

Answer is of course, (a),you gave them $1.00

However if you are drinking the government Kool-Aid, somehow you gave them anywhere from $1.61 to $2.00 of value. This is just poor logic. The government and some analysts’ thinking is that each dollar translates into more economic growth beyond the dollar. A dollar is a dollar is a dollar is a dollar. A dollar is not worth two dollars, a dollar is not worth $1.61. Do people really buy into this politically motivated economic rhetoric?

Is the Government’s Solution to Economic Recovery More Unemployment?
If it really was true that $1.00 of unemployment benefits created $1.61 to $2.00 in economic benefit why not pay unemployed workers even more? In fact, using this way of thinking, why not make everyone unemployed and then the economy will start booming like never before! Everybody just stop working, and utopia will arrive…. or so that is what the Obama Administration is trying to make us think.

Never mind the fact that the U.S. is going to have to borrow this money with interest from China and everyone else via their buying U.S. Treasury bonds. Then all we have to do is spend more money on long term unemployment benefits? With a rate of return of 61 to 100% from each unemployed person receiving $1.00, suddenly in no time, we should have grown our economy faster than any rate in world history? This is a better growth rate than the stock market. Under government math, Wall Street should just pull all their money out of businesses that help create jobs, and invest it in the Obama Unemployment Insurance Fund. With returns of 61 to 100% a year, you can’t lose?

Yet, AP writer Paul Wiseman who last month argued that political gridlock will be bad for the economy now suggests the following if we don’t extend unemployment benefits beyond 99 weeks now:

“— 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.”

— Quoted sources: Washington Post, NewsVine.com

The facts are that we already have some 15 million unemployed persons in the USA (Source: Economic Policy Institute). So those who receive unemployment benefits are already unemployed so that won’t change that number. Yet some people believe that another $55 billion will “save or create” one million American jobs (Source: Economic Policy Institute, PDF).

The claim that “Hundreds of thousands would fall into poverty” seems to ignore that if you are unemployed, and the government is sending you $300 or so a week (before taxes) you’re probably already in that category. On August 30, 2005 MS-NBC reported that the nation’s poverty rate rose to 12.7 percent, and this was a good thing?

“Poverty rate at 12.7 percent, 4th straight rise. Situation better than in the ’80s and early ’90s”

— Source: MS-NBC, 08-30-2005

I’m not sure how an increase in the poverty rate can be a good thing. On September 16, 2010, CNN reported:

“the nation’s poverty rate jumped to 14.3% in 2009, its highest level since 1994, and the 43.6 million Americans in need is the highest number in 51 years of record-keeping, the government said…”

— Sources: CNN, 09-16-2010 and U.S. Census Bureau

So we already know that we have millions of unemployed persons, and many are already technically in the poverty level, but if we stop paying those who are unemployed beyond 99 weeks, “Annual economic growth could fall by one half to nearly 1 percentage point?”

Somehow I don’t think so.

In order for this to occur, that would mean that the 1.3 million or 2 million (story link #109367 gone) “99ers” who are contributing nothing but the $300 or so in weekly unemployment checks to the economy account for 1% of the economic activity in the USA? I think not.

Now, this is not to hammer on those who are unemployed, but really to hammer on the government and other people’s thinking that if we don’t extend these benefits, economic hell is going to break loose.

Also, those who are living off these unemployment benefits are not likely buying homes, cars, or major appliances. They are arguably more likely buying food, paying rent, paying utility bills for heat, gas and power. In other words, they are covering the basic necessities. So when has the economy ever boomed for people paying gas/ electric bills, or buying basic food at the store? The economy is not driven based on utility companies. And if buying food is supposed to increase economic activity, we should been in an economy boom as at least one-third of Americas are we’ll, overweight according to the Centers for Disease Control (CDC).

Sure, no one should go hungry or be left homeless, so sure help people as they need, but let’s make a condition and temporarily put them to work. In order to continue receiving government unemployment benefits, why not require one to make say 5 attempts every day to try and find a job, or apply for a job. It must be documented and submitted to the agency paying the benefits. You don’t have to be successful; one just needs to make an effort. This will help weed out those who really don’t want to work, verses those who do.

Here are some national job sites:

At the time this was article was updated (12.03.2010) there were over 1 million new jobs available according to indeed.com (Source: indeed.com PDF / website). Does the President know about this? Can the press take some time and talk about all the jobs that are available? They may not all pay $75,000+ a year, but they pay. Monster.com helps people how to write a resume, how to interview, how to negotiate pay, and discusses all kinds of job advice – FREE. This might be a good place to try and start looking.

What Unemployment Benefits Really Mean
So now we have provided resources and a to do list to help the unemployed try and seek jobs. Lets take a look now at what extending this so called unemployment benefits legislation really mean.

Earlier this year, Congress had been discussing a $55 Billion bill called the American Jobs and Closing Tax Loopholes Act (H.R. 4213 Share Link, Full PDF 412pps). Here is what has not been well discussed by government officials to the public.

Of the $55 billion jobs bill proposed, it appears that only $3.6 Billion will actually go toward extending unemployment benefits. Thus, 93.45% will go to anything but jobless benefits.

— Source: Economic Policy Institute (EIP) (PDF), using deductive reasoning and elementary math.

According to the Economic Policy Institute (PDF), here is the layout on how this “jobs” money is to be spent. Quote:

A $7 billion package of loan guarantees for small business, and bonding authority for state and municipal infrastructure investment;
Renewal of the $6.6 billion research and development tax credit;
A $2.3 billion tax credit for capital investment in the United States in 2010;
Funding relief to keep employers from having to cut operations and lay off workers to meet the stringent, poorly conceived rules of the Pension Protection Act of 2006;
$24 billion in additional funding to help states pay for Medicaid, without which there will be significant layoffs in state governments across the nation;
$5 billion to renew individual tax cuts;
$2.6 billion for a one-year extension of the TANF emergency jobs fund, which has created almost 200,000 jobs; and
$1 billion to create 300,000 jobs for young people this summer.

This EIP report was published May 25, 2010. Notice that over half (56%) of the “unemployment money” goes to funding state’s Medicaid programs. We just can’t seem to escape putting in 50 cents of every tax dollar to bailout some government ran health care program.

Also notice that this bill suggests that we “have to” give $24 billion “to help states pay for Medicaid, without which there will be significant layoffs in state governments across the nation” (Source: Economic Policy Institute (PDF). So if we don’t give $24 billion to states, then there will be fewer workers on the government payroll, thus a smaller more fiscally efficient government? So what is wrong with a smaller, more fiscally efficient government?

The EIP also throws out some number suggesting that, “the $55 billion of additional income for jobless workers will be spent on goods and services in their local economies, generating an additional 0.65% of GDP.” Yet there is no calculation how spending $55 Billion translates into .65% increase in GDP.

If we just blindly believe the EIP’s reasoning that $55 Billion = 0.65% in GDP growth, then Obama’s $3.039 Trillion in spending (2009-2010) should have created utopia for everyone.

We were not compensated in any way to mention any of the companies listed in this report. The companies mentioned are responsible for their own content.

Jobs Archive

NetAdvisor.org® is a non-profit organization providing public education and analysis primarily on the U.S. financial markets, personal finance and analysis with a transparent look into U.S. public policy. We also perform and report on financial investigations to help protect the public interest. Read More.

Stop Working And Utopia Will Arrive?

Related Articles

U.S. Deficit Hits All Time Record in February

Economists Said What? Sorry, But The Recession is Not Over

The U.S. FED Printing $85 Billion Per Month of “Stimulus”