Im still confused as to what the reasoning is linking fascism and communism.
Like really really confused. National Socialism...isnt socialism guys.
EDIT: Like i remember the Glenn Beck segment on how Nazism/Fascism wasnt a far right ideology, but was just past the left of Communism.
I mean im not even getting how this is being taken seriously.
It's important when you talk to people with whom you disagree to get them to define their terms. What do they mean by left, right? Why does it matter to them? Nine times out of ten, they contradict themselves right away. This may not mean much to them, but if you get them looking like they don't have a fucking clue, other people are going to notice.
Its hard to stop such a rampant amount of misnformation, and i think what you're saying is one of the few legitimate ways to stop it. On the left and the right.
One more thing about Laffer's suggestion. He was talking about a payroll tax holiday only, not all taxes. Since those are paid 50/50 employer/employee, that's actually somewhat clever by lowering the cost of employment directly. This also sidesteps the issue of the minimum wage with respect to tax cuts.
I presume this was the proposal - in which case Laffer really was hammering on all taxes:
No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all
For newcomers to economic theory, the multiplier from payroll tax reductions is quite high, but dubious on many of the rest (how would canceling estate taxes increase spending in the short run? Unless people start "throwing Momma off the train"?).
Regardless, it still is deficit spending, albeit by holding spending constant and hiking the deficit. Keynesian, etc.
Not really though. Keynesianism requires that the money be spent. That's the whole point.
Tax cuts often end up being saved. That's why it encourages government spending, because it's guaranteed spending.
Which is the argument for a FICA holiday, and actually makes decent sense to me. If you're going to cut taxes as stimulus, it seems like the obvious one to choose.
Unless you're a gold toilet bowl maker, in which case...
enlightenedbum on
Self-righteousness is incompatible with coalition building.
One more thing about Laffer's suggestion. He was talking about a payroll tax holiday only, not all taxes. Since those are paid 50/50 employer/employee, that's actually somewhat clever by lowering the cost of employment directly. This also sidesteps the issue of the minimum wage with respect to tax cuts.
I presume this was the proposal - in which case Laffer really was hammering on all taxes:
No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all
For newcomers to economic theory, the multiplier from payroll tax reductions is quite high, but dubious on many of the rest (how would canceling estate taxes increase spending in the short run? Unless people start "throwing Momma off the train"?).
Regardless, it still is deficit spending, albeit by holding spending constant and hiking the deficit. Keynesian, etc.
Not really though. Keynesianism requires that the money be spent. That's the whole point.
Tax cuts often end up being saved. That's why it encourages government spending, because it's guaranteed spending.
@ronya: Well damn, in that piece he is calling for an all-tax holiday. That's... bold. I'll leave it at that.
@shryke: Stimulative tax cuts are just as Keynesian as stimulative spending. Either does the same in the Keynesian model, minus the marginal propensity to save "cut" in the first round of the multiplier effect. Remember Bush II's first round of tax cuts? Classic Keynesian stimulus.
One more thing about Laffer's suggestion. He was talking about a payroll tax holiday only, not all taxes. Since those are paid 50/50 employer/employee, that's actually somewhat clever by lowering the cost of employment directly. This also sidesteps the issue of the minimum wage with respect to tax cuts.
I presume this was the proposal - in which case Laffer really was hammering on all taxes:
No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all
For newcomers to economic theory, the multiplier from payroll tax reductions is quite high, but dubious on many of the rest (how would canceling estate taxes increase spending in the short run? Unless people start "throwing Momma off the train"?).
Regardless, it still is deficit spending, albeit by holding spending constant and hiking the deficit. Keynesian, etc.
Not really though. Keynesianism requires that the money be spent. That's the whole point.
Tax cuts often end up being saved. That's why it encourages government spending, because it's guaranteed spending.
@ronya: Well damn, in that piece he is calling for an all-tax holiday. That's... bold. I'll leave it at that.
@shryke: Stimulative tax cuts are just as Keynesian as stimulative spending. Either does the same in the Keynesian model, minus the marginal propensity to save "cut" in the first round of the multiplier effect. Remember Bush II's first round of tax cuts? Classic Keynesian stimulus.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Yup. Tax Cuts have like the worst multiplier effect.
It's Keynesian in the same way that a Go-Kart is a car.
shryke on
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HachfaceNot the Minister Farrakhan you're thinking ofDammit, Shepard!Registered Userregular
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Yup. Tax Cuts have like the worst multiplier effect.
It's Keynesian in the same way that a Go-Kart is a car.
Makes sense to me. People can hoard a tax cut, but food stamps can only be spent.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Yup. Tax Cuts have like the worst multiplier effect.
It's Keynesian in the same way that a Go-Kart is a car.
Makes sense to me. People can hoard a tax cut, but food stamps can only be spent.
Actually, it's probably more that poor people have to spend while rich people hoard.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Yup. Tax Cuts have like the worst multiplier effect.
It's Keynesian in the same way that a Go-Kart is a car.
Makes sense to me. People can hoard a tax cut, but food stamps can only be spent.
Actually, it's probably more that poor people have to spend while rich people hoard.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
What enc0re said.
When you read numbers on the multiplier, exercise some care as to whether the author has already removed 1 from the figure to account for the deficit generated. I expect your two-cents-to-the-dollar figure comes from the much-circulated 1.02 multiplier for the Bush tax rebates. Which is awful, but (1) still more than 1, and (2) the multiplier for other types of tax cuts is not 1.02; sometimes more and sometimes less. Krugman usually cites 1.29 for payroll tax holidays.
There is a reason payroll tax cuts are stimulative even if you believe that all tax cuts on discretionary income are saved. And that is because Keynesians generally blame sustained unemployment on sticky wages - real wages should go down during a recession, but they don't, so we get sustained unemployment.
Payroll tax cuts directly reduce the cost of labor, thus also reducing the real cost of labor. This is why writers like Krugman and Delong support temporary payroll tax cuts. Remember that for this cut to work, it must reduce the cost of labor from the point of view of the employer; handing out negative income taxes won't work here.
Of course, tax cuts are not wholly saved, which improves the picture even more. Less so for things like cuts to capital gains taxes, which does hinge purely on the propensity to save.
(Note that if you buy into Minsky-moment descriptions of the crisis, you should be supporting tax cuts on corporate profits and capital gains. This is because, unlike 'normal' demand-shortfall recessions, financial-crisis firms will save until they can reinvest from profits; until then employment will not recover. It is somewhat depressing how many pundits seized onto Minsky for narratives, then promptly discarded it for standard theory when digging for solutions).
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
What enc0re said.
When you read numbers on the multiplier, exercise some care as to whether the author has already removed 1 from the figure to account for the deficit generated. I expect your two-cents-to-the-dollar figure comes from the much-circulated 1.02 multiplier for the Bush tax rebates. Which is awful, but (1) still more than 1, and (2) the multiplier for other types of tax cuts is not 1.02; sometimes more and sometimes less. Krugman usually cites 1.29 for payroll tax holidays.
There is a reason payroll tax cuts are stimulative even if you believe that all tax cuts on discretionary income are saved. And that is because Keynesians generally blame sustained unemployment on sticky wages - real wages should go down during a recession, but they don't, so we get sustained unemployment.
Payroll tax cuts directly reduce the cost of labor, thus also reducing the real cost of labor. This is why writers like Krugman and Delong support temporary payroll tax cuts. Remember that for this cut to work, it must reduce the cost of labor from the point of view of the employer; handing out negative income taxes won't work here.
Of course, tax cuts are not wholly saved, which improves the picture even more. Less so for things like cuts to capital gains taxes, which does hinge purely on the propensity to save.
(Note that if you buy into Minsky-moment descriptions of the crisis, you should be supporting tax cuts on corporate profits and capital gains. This is because, unlike 'normal' demand-shortfall recessions, financial-crisis firms will save until they can reinvest from profits; until then employment will not recover. It is somewhat depressing how many pundits seized onto Minsky for narratives, then promptly discarded it for standard theory when digging for solutions).
Actually, saying "two cents" was hyperbolic. The real number was closer to sixty cents for a dollar.
Im still confused as to what the reasoning is linking fascism and communism.
Like really really confused. National Socialism...isnt socialism guys.
EDIT: Like i remember the Glenn Beck segment on how Nazism/Fascism wasnt a far right ideology, but was just past the left of Communism.
I mean im not even getting how this is being taken seriously.
It's important when you talk to people with whom you disagree to get them to define their terms. What do they mean by left, right? Why does it matter to them? Nine times out of ten, they contradict themselves right away. This may not mean much to them, but if you get them looking like they don't have a fucking clue, other people are going to notice.
Its hard to stop such a rampant amount of misnformation, and i think what you're saying is one of the few legitimate ways to stop it. On the left and the right.
All this shows is that people aren't logical and you can't beat a bad argument by showing contradicting facts. It doesn't mean that bad ideas aren't beatable, it means that you have to engage in rhetorical tactics rather than logical rebuttals, and understand that people value teams more than the truth.
It is entirely sensible to use ideology and motivation as a first-pass heuristic; thinking carefully is hard, and most interesting issues are subtle, and there are always more cranks than there are scientists.
There are terribly, terribly few people who can think fast enough on their feet to argue sensibly in a real-time conversation. For the rest of us mere mortals, becoming more cautious about new ideas when confronted with an ideological attack, any attack, until you can think carefully about it is only sensible. Facts are easy to misrepresent. Maybe you aren't being told everything. If you're being besieged, it is likely your attacker already has a good idea what your instinctual reactions will be and has already prepared a reply. Better to close your mind than risk needless confusion. You can always open it later.
(of course, by that time you have found a reply that seems plausible, so you conclude that your side has again triumphed over the benighted enemy)
All this shows is that people aren't logical and you can't beat a bad argument by showing contradicting facts. It doesn't mean that bad ideas aren't beatable, it means that you have to engage in rhetorical tactics rather than logical rebuttals, and understand that people value teams more than the truth.
I don't think I even know how to do that. I'm just a dork who has lots of statistics memorized which usually intimidates most people I debate with IRL.
CommunistCow on
No, I am not really communist. Yes, it is weird that I use this name.
All this shows is that people aren't logical and you can't beat a bad argument by showing contradicting facts. It doesn't mean that bad ideas aren't beatable, it means that you have to engage in rhetorical tactics rather than logical rebuttals, and understand that people value teams more than the truth.
I don't think I even know how to do that. I'm just a dork who has lots of statistics memorized which usually intimidates most people I debate with IRL.
Oh.
I have a shitty memory for numbers, and I don't trust other peoples' memories to accurately or honestly regurgitate such numbers. If you're talking, it's not good to drop those IMHO. It's good to know those for your own use, insofar as you can see if your policies/whatever are working or not, but I don't think they're rhetorically useful.
Our latest Senate simulation has the chamber convening in 2011 with an average of 53.4 Democrats (counting Joe Lieberman and Bernie Sanders), 46.1 Republicans, and 0.5 Charlie Crists. This is an improvement for Republicans from our last forecast three weeks ago, which had 55.2 Democrats, 44.2 Republicans, and 0.6 Crists. The changes, however, predominantly reflect several methodological improvements we have made rather than any particular national momentum, although the dynamics of some individual contests are certainly evolving.
The model gives Republicans a 17 percent chance of taking over the Senate if Charlie Crist caucuses with them, up significantly from 6 percent three weeks ago. If Crist does not caucus with them, their chances of a takeover are 12 percent. However, the model does not account for the contingency that someone like Joe Lieberman or Ben Nelson could decide to switch parties, which makes their chances slightly better than we suggest here.
Democrats' chances of gaining a net of one or more seat and re-claiming a 60-seat majority are 7 percent, down from 12 percent three weeks ago. If they could persuade Charlie Crist to caucus with them, however, their chances would improve to 10 percent.
Meanwhile, in the house, the Blue Dogs are looking to mostly get the axe.
Leaving aside the small group of dead-in-the-water "probable switch" seats,* the two figures reveal a rather astonishing, but virtually identical distribution of the voting records of House incumbents currently occupying what Wasserman ranks as either "toss-up" (27) or "also competitive" (29) seats. The mean ranking for both groups (186, 187) is basically the same--and this despite the slight weighing down of that average of a handful of liberal outliers among both groups, including four "toss-up" seats where the member has a vote rating lower than 128 and two such seats among the "also competitive" group. The pattern is clear: Some of the most conservative members of the House Democratic caucus, those with vote scores that rank them in the high 100s or low 200s of the 256-member caucus, are in trouble. Heck, Alabama's Bobby Bright is actually the 264th most liberal member in a House that only has 256 Democratic-held seats!
What can we conclude from this data?
1. Blue Dogs or other House Democrats who often vote with them are going to account for the vast majority of House Democratic losses this November, which is not a real shocker to anyone following the situation closely;
2. The voting records of those in greater jeopardy ("toss-ups") are not much different from those who are in somewhat lesser jeopardy (the "also-competitive" seat-holders). Of course, vulnerability is a function of factors other than roll call voting records, including money and strength of opponent and district demographics and seniority.
3. The House Democratic caucus, whether holding onto a thinner majority or falling into the minority, will be more liberal in the 112th Congress than it is now.
To begin, for comparative purposes it's eerily convenient that the Dems headed into their 1994 slaughter with the same number of seats they do today: 256.* Though same in number, the two Democratic coalitions are not the same geographically.
What's interesting about the two scenarios is the geographic distribution of the potential gains. Short story? In the latter, "big wave" scenario the Republicans double their pickups in the Northeast and Far West, giving them enough to build a majority, whereas they fall short in the regular wave scenario because southern and midwestern seats captured (or recaptured from 2006 or 2008) are insufficient to elevate John Boehner into the Speaker's office, as you can see in Table 2 below.
Wow, that's a lovely graph. So let's see, he's defining unemployment benefits paid as the average amount payed per recipient multiplied by the average duration of benefits. That's fine, except for the fact that those spikes in the unemployment rate are recessions. Unemployment benefits are typically extended during recessions. You can even see the lag time in every single spike on that graph. Even worse is that he's using that graph to support the concept that if benefits were $150k/week, nobody would work, completely ignoring the duration of the benefits. I'm also leery of any economist/physicist/whatever using the terms "common sense" and "personal experience" as part of their argument.
Wow, that's a lovely graph. So let's see, he's defining unemployment benefits paid as the average amount payed per recipient multiplied by the average duration of benefits. That's fine, except for the fact that those spikes in the unemployment rate are recessions. Unemployment benefits are typically extended during recessions. You can even see the lag time in every single spike on that graph. Even worse is that he's using that graph to support the concept that if benefits were $150k/week, nobody would work, completely ignoring the duration of the benefits. I'm also leery of any economist/physicist/whatever using the terms "common sense" and "personal experience" as part of their argument.
What a fucking hack.
I can't see how he would think this graph proves his point at all. If he's claiming that increased unemployment benefits increase the unemployment rate, wouldn't increases in the benefits have to come before increases in the rate rather than after?
Yeah, if anything it shows that an increase in unemployment benefits coincides with the beginning of the end of a recession. I'm not going to use that observation to conclude that unemployment benefit extensions single-handedly end recessions, though.
There's also the prizewinner of putting these two paragraphs together in the same article:
The flaw in their logic is that when it comes to higher unemployment benefits or any other stimulus spending, the resources given to the unemployed have to be taken from someone else. There isn't a "tooth fairy," or as my former colleague Milton Friedman repeated time and again, "there ain't no such thing as a free lunch." The government doesn't create resources. It redistributes them. For everyone who is given something there is someone who has that something taken away.
My suggestion would have been to take all $3.6 trillion and declare a federal tax holiday for 18 months. No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all, which would have reduced federal revenues by $2.4 trillion annually. Can you imagine where employment would be today? How does a 2.5% unemployment rate sound?
and thus moving from total Ricardian equivalence to nil equivalence in the space of half a page.
It is wholly an essay which presumes that the reader is going to believe every claim without bothering to stop and think. The problem with suggesting that UI decreases job incentives and thereby increases unemployment duration is that it requires a lot of very boring regressions to demonstrate as such; you can't just slap a graph like that and expect it to have proven your point. There are so many obvious confounding variables like the one His Corkiness mentions... of course, that would make for a less-read editorial, wouldn't it?
I note that Laffer has left academia for consulting.
Yeah, that WSJ opinion piece of his is crummy. Unemployment benefits raising the unemployment rate is pretty non-controversial though. Basically, in the Keynesian framework anything that prevents wages from falling is responsible for unemployment. Unemployment insurance obviously does that.
I teach economics. Some of the concepts promoted by classical and monetarist economists are so ridiculous that I preface my descriptions of them by telling the class that the concepts are so stupid that only an economist would buy them. Dr. Laffer's apple story will be added to that list.
In the real world, we would see this: apple farmers bring 100 apples to market, ten of which have been bought by people who now do not have jobs. Because these people no longer have incomes, the apples go unsold, and some of the farmers go out of business. More people lose their jobs, and the economy of Appleville shrinks.
If the government borrows money (from the apple growers) to give to the unemployed, the ten apples still will be bought, and the apple farmers will be able to stay in business. In fact, they are likely to be better off than before because the government will be paying back the money it borrowed with interest.
Later on, the apple growers will use this additional income to hire hack economists, who will go to Washington to make demonstrably false claims that tax cuts actually will lead to higher government revenues, and, if policy makers there prove to be so stupid as most economists, taxes will be cut. The rest of the story is sort of sad. I'm sure that you can see what will happen.
Note: most of it is really really bad retarded type shit which doesn't understand Econ. But I thought this was funny.
Yeah, that WSJ opinion piece of his is crummy. Unemployment benefits raising the unemployment rate is pretty non-controversial though. Basically, in the Keynesian framework anything that prevents wages from falling is responsible for unemployment. Unemployment insurance obviously does that.
But only in a situation where there is full employment. If there is not full employment then benefits are non-binding on employment as the employment decision of the firm is between applicants and not between attempting to lure someone into the workforce*.
That is to say, when 10 people are hedging for 5 jobs it doesn't matter if one or two of them may be less zealous as they could be when attempting to get those jobs. 5 people are going to be hired and 5 people are going to be unemployed.
In short, during times of recession and high unemployment, jobless benefits do not have the otherwise negative effect on employment that they would have. They do however have a strong stimulus effect as people who would otherwise be without income, have income such that they can both consume and spend time looking for work.
*I.E. At full employment in an economy with 10 people with frictional/structural unemployment of 10%(or 1 person) this means that there is roughly 10 people in the workforce, 9 people working and 10 jobs available. That 10th person can't take that 10th job or is not wanted. If that 10th job is going to get filled it has to either poach an employee of another firm or it has to lure someone into the workforce who is qualified.
But, if it poaches someone from another firm, then that position at that firm is now empty, which means they have to poach someone from another firm or lure someone into the workforce...
I.E. at full employment, adding positions will necessarily pull people into the workforce(so long as that position is filled). Below full employment every job that is created will pull people off unemployment.
Edit: A better way to describe the employment/unemployment tradeoff with regards to jobless benefits is that jobless benefits can modify the full employment unemployment level (I.E. the amount of frictional/structural unemployment) but will not modify unemployment itself (unless of course its at that level)
In short, during times of recession and high unemployment, jobless benefits do not have the otherwise negative effect on employment that they would have.
In other words, austerity makes sense during booms but is poison during busts.
Too bad we wasted all our boom money on wars and tax cuts for McMansions.
Jumping in. One thing I've yet to see any articles or numbers on: for every anecdote or statistic claiming people on unemployment are passing up jobs, how many of those jobs are getting filled anyway by other applicants? I would only agree that it's a "problem" if employers are having a hard time filling open positions.
My employer rarely has positions open longer than a week or two before filling them. Once again, anecdotal.
Yeah, that WSJ opinion piece of his is crummy. Unemployment benefits raising the unemployment rate is pretty non-controversial though. Basically, in the Keynesian framework anything that prevents wages from falling is responsible for unemployment. Unemployment insurance obviously does that.
But only in a situation where there is full employment. If there is not full employment then benefits are non-binding on employment as the employment decision of the firm is between applicants and not between attempting to lure someone into the workforce*.
That is to say, when 10 people are hedging for 5 jobs it doesn't matter if one or two of them may be less zealous as they could be when attempting to get those jobs. 5 people are going to be hired and 5 people are going to be unemployed.
In short, during times of recession and high unemployment, jobless benefits do not have the otherwise negative effect on employment that they would have. They do however have a strong stimulus effect as people who would otherwise be without income, have income such that they can both consume and spend time looking for work.
*I.E. At full employment in an economy with 10 people with frictional/structural unemployment of 10%(or 1 person) this means that there is roughly 10 people in the workforce, 9 people working and 10 jobs available. That 10th person can't take that 10th job or is not wanted. If that 10th job is going to get filled it has to either poach an employee of another firm or it has to lure someone into the workforce who is qualified.
But, if it poaches someone from another firm, then that position at that firm is now empty, which means they have to poach someone from another firm or lure someone into the workforce...
I.E. at full employment, adding positions will necessarily pull people into the workforce(so long as that position is filled). Below full employment every job that is created will pull people off unemployment.
Edit: A better way to describe the employment/unemployment tradeoff with regards to jobless benefits is that jobless benefits can modify the full employment unemployment level (I.E. the amount of frictional/structural unemployment) but will not modify unemployment itself (unless of course its at that level)
We should probably have this discussion in the [Economy] thread, but what you are describing is not what I'm talking about. You are talking about how the supply side effect of unemployment benefits (i.e. fewer job seekers) is not a problem during persistent and high unemployment. Agreed, no question about it.
What I'm talking about is that on the demand side (i.e. number of workers firms want) the real wage needs to fall to eliminate the labor surplus.
In other words, we have three related problems. 1. Unemployment too high. 2. Imports too high. 3. Exports too low. Lowering wages across the board eliminates all three problems. 1. Firms find it more profitable to suck up the extra labor. 2. Imports become too expensive for workers here. 3. Our exports become more competitive globally.
Keynesians would argue that the reason wages don't fall "by themselves" to eliminate those problems is their "stickiness" due to asymmetric information in the labor market.
Usually what (developing) countries do in this situation is devalue their currency. That lowers real wages without the actual currency wage falling. We don't want to due that since we would loose reserve currency status if we did. And sitting on the reserve currency is totally awesome in the long run. Basically, we face a similar situation to Greece, although much less grim. It too cannot devalue to rebalance its economy. Since we don't want to devalue, we need lower wages in the country instead.
In other words, we have three related problems. 1. Unemployment too high. 2. Imports too high. 3. Exports too low. Lowering wages across the board eliminates all three problems. 1. Firms find it more profitable to suck up the extra labor. 2. Imports become too expensive for workers here. 3. Our exports become more competitive globally.
Real wage deflation is the way out.
I'm not knowledgeable enough on economic theory to really add to this debate, but I don't understand how unemployment benefits keeps wages high or how eliminating them would cause wages to drop.
Its Laffer. His most famous contribution to economics is getting people to say with a straight face that the best way to increase tax revenues is to cut taxes. He's an ideological hack and its well known enough that it should probably be on his business card.
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I also blame that stupid circular political graph that looks like something produced in a second grade social studies class.
Not really though. Keynesianism requires that the money be spent. That's the whole point.
Tax cuts often end up being saved. That's why it encourages government spending, because it's guaranteed spending.
Unless you're a gold toilet bowl maker, in which case...
@ronya: Well damn, in that piece he is calling for an all-tax holiday. That's... bold. I'll leave it at that.
@shryke: Stimulative tax cuts are just as Keynesian as stimulative spending. Either does the same in the Keynesian model, minus the marginal propensity to save "cut" in the first round of the multiplier effect. Remember Bush II's first round of tax cuts? Classic Keynesian stimulus.
Except for the part where that deficit is supposed to be stimulative, which tax cuts aren't (what is it? two cents for every dollar of tax cuts?)
If that's your impression of how the economy works, more power to you. But that's pretty far removed from mainstream macro.
There was some chart circulating around when the stimulus was being debated that showed the multiplier effects of income tax cuts were significantly less than those of things like increased food stamp benefits. That is probably what he is thinking of.
Yup. Tax Cuts have like the worst multiplier effect.
It's Keynesian in the same way that a Go-Kart is a car.
Makes sense to me. People can hoard a tax cut, but food stamps can only be spent.
Actually, it's probably more that poor people have to spend while rich people hoard.
1 up!
What enc0re said.
When you read numbers on the multiplier, exercise some care as to whether the author has already removed 1 from the figure to account for the deficit generated. I expect your two-cents-to-the-dollar figure comes from the much-circulated 1.02 multiplier for the Bush tax rebates. Which is awful, but (1) still more than 1, and (2) the multiplier for other types of tax cuts is not 1.02; sometimes more and sometimes less. Krugman usually cites 1.29 for payroll tax holidays.
There is a reason payroll tax cuts are stimulative even if you believe that all tax cuts on discretionary income are saved. And that is because Keynesians generally blame sustained unemployment on sticky wages - real wages should go down during a recession, but they don't, so we get sustained unemployment.
Payroll tax cuts directly reduce the cost of labor, thus also reducing the real cost of labor. This is why writers like Krugman and Delong support temporary payroll tax cuts. Remember that for this cut to work, it must reduce the cost of labor from the point of view of the employer; handing out negative income taxes won't work here.
Of course, tax cuts are not wholly saved, which improves the picture even more. Less so for things like cuts to capital gains taxes, which does hinge purely on the propensity to save.
(Note that if you buy into Minsky-moment descriptions of the crisis, you should be supporting tax cuts on corporate profits and capital gains. This is because, unlike 'normal' demand-shortfall recessions, financial-crisis firms will save until they can reinvest from profits; until then employment will not recover. It is somewhat depressing how many pundits seized onto Minsky for narratives, then promptly discarded it for standard theory when digging for solutions).
Actually, saying "two cents" was hyperbolic. The real number was closer to sixty cents for a dollar.
All this shows is that people aren't logical and you can't beat a bad argument by showing contradicting facts. It doesn't mean that bad ideas aren't beatable, it means that you have to engage in rhetorical tactics rather than logical rebuttals, and understand that people value teams more than the truth.
Maybe if you don't enjoy fucking with people.
There are terribly, terribly few people who can think fast enough on their feet to argue sensibly in a real-time conversation. For the rest of us mere mortals, becoming more cautious about new ideas when confronted with an ideological attack, any attack, until you can think carefully about it is only sensible. Facts are easy to misrepresent. Maybe you aren't being told everything. If you're being besieged, it is likely your attacker already has a good idea what your instinctual reactions will be and has already prepared a reply. Better to close your mind than risk needless confusion. You can always open it later.
(of course, by that time you have found a reply that seems plausible, so you conclude that your side has again triumphed over the benighted enemy)
I don't think I even know how to do that. I'm just a dork who has lots of statistics memorized which usually intimidates most people I debate with IRL.
Oh.
I have a shitty memory for numbers, and I don't trust other peoples' memories to accurately or honestly regurgitate such numbers. If you're talking, it's not good to drop those IMHO. It's good to know those for your own use, insofar as you can see if your policies/whatever are working or not, but I don't think they're rhetorically useful.
http://www.fivethirtyeight.com/2010/07/senate-forecast-718-republican-outlook.html
Meanwhile, in the house, the Blue Dogs are looking to mostly get the axe.
http://www.fivethirtyeight.com/2010/07/blue-dogs-be-dog-gone-soon.html
Another perspective on the House talks about why this isn't 1994:
seemed not too bad, although he still comes across as being terrified...
Democrats Abroad! || Vote From Abroad
Honestly, it's understandable.
I almost want to do some work for the poor guy's campaign.
But I don't live in SC
Democrats Abroad! || Vote From Abroad
This Alvin Greene thing is phenomenal! My goodness, that's great theater!
What a fucking hack.
I can't see how he would think this graph proves his point at all. If he's claiming that increased unemployment benefits increase the unemployment rate, wouldn't increases in the benefits have to come before increases in the rate rather than after?
and thus moving from total Ricardian equivalence to nil equivalence in the space of half a page.
It is wholly an essay which presumes that the reader is going to believe every claim without bothering to stop and think. The problem with suggesting that UI decreases job incentives and thereby increases unemployment duration is that it requires a lot of very boring regressions to demonstrate as such; you can't just slap a graph like that and expect it to have proven your point. There are so many obvious confounding variables like the one His Corkiness mentions... of course, that would make for a less-read editorial, wouldn't it?
I note that Laffer has left academia for consulting.
Note: most of it is really really bad retarded type shit which doesn't understand Econ. But I thought this was funny.
But only in a situation where there is full employment. If there is not full employment then benefits are non-binding on employment as the employment decision of the firm is between applicants and not between attempting to lure someone into the workforce*.
That is to say, when 10 people are hedging for 5 jobs it doesn't matter if one or two of them may be less zealous as they could be when attempting to get those jobs. 5 people are going to be hired and 5 people are going to be unemployed.
In short, during times of recession and high unemployment, jobless benefits do not have the otherwise negative effect on employment that they would have. They do however have a strong stimulus effect as people who would otherwise be without income, have income such that they can both consume and spend time looking for work.
*I.E. At full employment in an economy with 10 people with frictional/structural unemployment of 10%(or 1 person) this means that there is roughly 10 people in the workforce, 9 people working and 10 jobs available. That 10th person can't take that 10th job or is not wanted. If that 10th job is going to get filled it has to either poach an employee of another firm or it has to lure someone into the workforce who is qualified.
But, if it poaches someone from another firm, then that position at that firm is now empty, which means they have to poach someone from another firm or lure someone into the workforce...
I.E. at full employment, adding positions will necessarily pull people into the workforce(so long as that position is filled). Below full employment every job that is created will pull people off unemployment.
Edit: A better way to describe the employment/unemployment tradeoff with regards to jobless benefits is that jobless benefits can modify the full employment unemployment level (I.E. the amount of frictional/structural unemployment) but will not modify unemployment itself (unless of course its at that level)
In other words, austerity makes sense during booms but is poison during busts.
Too bad we wasted all our boom money on wars and tax cuts for McMansions.
My employer rarely has positions open longer than a week or two before filling them. Once again, anecdotal.
We should probably have this discussion in the [Economy] thread, but what you are describing is not what I'm talking about. You are talking about how the supply side effect of unemployment benefits (i.e. fewer job seekers) is not a problem during persistent and high unemployment. Agreed, no question about it.
What I'm talking about is that on the demand side (i.e. number of workers firms want) the real wage needs to fall to eliminate the labor surplus.
In other words, we have three related problems. 1. Unemployment too high. 2. Imports too high. 3. Exports too low. Lowering wages across the board eliminates all three problems. 1. Firms find it more profitable to suck up the extra labor. 2. Imports become too expensive for workers here. 3. Our exports become more competitive globally.
Keynesians would argue that the reason wages don't fall "by themselves" to eliminate those problems is their "stickiness" due to asymmetric information in the labor market.
Usually what (developing) countries do in this situation is devalue their currency. That lowers real wages without the actual currency wage falling. We don't want to due that since we would loose reserve currency status if we did. And sitting on the reserve currency is totally awesome in the long run. Basically, we face a similar situation to Greece, although much less grim. It too cannot devalue to rebalance its economy. Since we don't want to devalue, we need lower wages in the country instead.
Real wage deflation is the way out.
I'm not knowledgeable enough on economic theory to really add to this debate, but I don't understand how unemployment benefits keeps wages high or how eliminating them would cause wages to drop.
QEDMF xbl: PantsB G+