More data to refute the GOP's BS economic beliefs. Of course the GOP and conservative WSJ/Bloomberg Businessweek used Fed data to calculate that if Obama's request to extend unemployment benefits goes through, it will result in 0.4-0.8% higher unemployment during the duration of coverage vs. if the benefits expired. We know that "handouts" are disincentives to find work. But there is another side of the coin. The Fed study's authors state that a "second stimulus" is created due to unemployment benefits, but I guess the sophisticated business press overlooked it. The recipients are more likely to stay afloat (thereby averting some of the social costs of unemployment), and they are very likely to spend most or all of their benefits to survive, which injects more cash into the economy, which in turns spurs investment, hiring, growth, and deficit reduction (all the things that the GOP claims their policies promote). The Fed estimates that some 700,000 new jobs can be created from the benefits being spent. Spending by people on unemployment will also trickle to small business owners who are not eligible for unemployment insurance, and therefore depend on revenues to keep their operations going, so it's fairly egalitarian. Unemployment assistance is as big of a win-win as you can find these days, yet of course that is precisely what the GOP opposes and wants to cut. Why anyone who earns less than $150K/year and isn't an extremist Christian would support the GOP these days is beyond me. I'm not saying we all should be Dems, but at least quit the party that doesn't give a shit about you and all the hard-working, honest folks who are getting crushed by economic forces out of their control.
Also, those on unemployment benefits will probably spend all of their assistance because it is only a fraction of their former salaries, and they may have already been living month-to-month even while fully employed. Changing gears a bit, the poor spend all of their tax credits, and then some (according to this Economist piece), because they often don't own real estate and have less incentive/ability to save. Remember in 2008 how Dubya gave a $300 stimulus check to each taxpayer, regardless of income? The poor (earning <$32K) increased their spending by $384 on average, and the rich (earning >$75K, though in parts of America $75K is hardly rich) increased by only $231. So that means the economy gets more help from aid to the poor than to the rich. And the rich will get theirs anyway, since extra spending by the poor will improve earnings, dividends, and stock values for the consumer firms that the rich own/invest in. The rich may not even notice the extra bit in their paychecks, and it's such a small fraction of their disposable income anyway, so they just pocket it or let it earn an investment return. Ironically, the middle earners (between the 2 groups) spent even less of the stimulus. The author hypothesizes that this is due to many middle class Americans having mortgages and credit card debt that they would rather help pay off than spend on new purchases (I think there were news reports on this at the time). But still, that is economically sound because it reduces their risk of foreclosure, dings to their credit rating, and wasted money on exorbitant interest rates. We get the least bang for our buck by helping the rich, which is pretty much obvious to everyone but 41 senators it seems.
I see now that the Dems are revolting against Obama's tax compromise and are crafting new legislation in response. I understand some of the anger against Obama, but the real culprit is the abuse of the filibuster. I know they don't have the votes for filibuster reform either (and the Dems may not want to take that weapon off the table, because they are bound to be the Senate minority many more times in the future), but at least point the finger at the right culprit.
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