Say Nancy Pelosi and Nouriel Rubini:
http://www.thedailyshow.com/watch/tue-july-6-2010/america-s-got-nothing
Because there’s no better way to lower unemployment than… to give people a reason not to work.
its actually an even worse argument that that. This is more than just the ‘provide a safety net’ argument, she is saying it actually STIMULATES the economy. Which I guess in a way is true, for the short term, however, in the long term it is certainly worse.
Depends on what you mean by “stimulate.” That’s one of the things that bugs me about modern economics and specifically terminology. The idea that the flow of money itself, whatever the source of it, is in and of itself ‘good’ for the economy is just flat out wrong.
Then why not just hand out $50k checks to everyone – employed or not – and stimulate the economy into an orgasmic moan?
Bingo.
Even the super left-wing Keynesian Hyman Minsky thought that unemployment benefits and welfare checks were a silly way to “stimulate” the economy. Of course, he still wanted to expand government expenditures by creating more infrastructure jobs through a WPA-like agency, but hey, that sounds better to me than handing out money for nothing. At least the general public gets some benefits from public works.
It’s funny because on MSNBC’s Morning Joe (I admit I turn it on once in awhile) today Chris Matthews was lamenting that the left is not selling up their Keynesianism enough and letting the Repubs beat them up with their “big spending is bad” rhetoric. Perhaps he was disgustingly responding to Pelosi’s idiocy.
Pelosi’s comments have to go down into the Economic Ignorance Hall of Fame. Honestly, I can’t remember a dumber thing that’s ever been uttered by a politician. Can you?
I can think of something smarter…
“What essentially sets a nation-state apart… is its monopoly on violence.” - Barack Obama.
(2:05)
but the downside to public works is that even more resources get diverted. The concrete that went into building some museum or monument, is now no longer available to be used in some other means.
Joe, that’s true and that’s why tax cuts followed by spending cuts are preferable to “stimulus” spending increases. But at least public works provide some value to consumers, whereas unemployment benefits simply shrink the labor supply at the expense of everyone.
this is sort of a ‘on which side of your face would you rather get punched’ sort of debate, but I think that public works can divert resources on a more permanent basis. Unemployment benefits aren’t going to go on forever. Some of the benefits are that people can hold out longer and wait for a job opening in a position that they would be more productive in. It might be more difficult to find that more productive job while working in a less productive job. Although, when the government is involved, this natural waiting time gets distorted. In one sense, without the government these unemployed would have more savings, so they could afford to wait longer, so its the governments fault that w/o unemployment insurance people have to take worse jobs. But two government wrongs do not make a right. Also, unemployment insurance might encourage someone to get more education or training, which is good, but not when done on the governments dime. People are already overqualified in terms of their credentials.
But with public works, those misallocated resources are tied up for longer than unemployment benefits. The stone used to build a monument is going to be diverted from its more productive use for centuries. There are going to be people who instead of picking up a more productive trade, are funneled into construction public works fields. One might have to start all over and pick up a new trade later, or might think that because he already has construction experience, that he “IS” a construction worker, and once the public works run out there will be a huge over supply of construction workers and jobsite managers, etc.
Haha! So true. That’s a great way of putting it.
Honestly, the way I read it, you pretty much destroy your own argument. There seem to be no benefits from unemployment insurance at all, whereas I would argue that there are some benefits to more roads, canals, schools, courthouses, power plants, etc. Also, construction of roads, power plants, power grids, etc. might actually help at least some businesses. For example, a new road to an isolated town (think Palin’s bridge to nowhere) could bring new business there and increase living standards for people in that town as well as people in the surrounding area. Of course, such a project would be negative on net, but still less negative than shrinking the labor supply and thereby hurting both businesses and other individiuals by decreasing overall output.
public works projects are going to be more expensive than unemployment benefits per person, in that the government also has to buy the materials to actually do the public works. This bids up prices for productive private businesses.
Public works project also shrink the ‘productive’ labor supply, and could even result in labor costing more for private business, so I don’t see how that aspect of it is any different than unemployment benefits.
This is similar to the argument that was brought up a while ago, of would the economy be more productive if the government just took all the money it collected from taxes and burned it (or in real life, deleted it).