Monday, March 31, 2014

Unemployment Benefits and My Scott Sumner Problem

     Call this the unemployment benefits edition. In my last post we looked at my Sumner problem in the capital gains taxes are terrible and should be zero edition.

      Krugman, the capital gains tax, and the lies of Scott Sumner


     There was a story in Newsday today about how many people on Long Island are suffering after losing their unemployment benefits.

      "Growing numbers of jobless Long Islanders are struggling to survive with little to no income since extended federal unemployment benefits ended in December."

      "Despite improving local unemployment rates and job growth, thousands of long-term unemployed are still unable to find work, and now many say they are running out of money to meet even basic expenses."

      "A bipartisan compromise was reached recently in the U.S. Senate to provide extended benefits through May, retroactive to December, but it faces an uncertain fate in the House."

     Yes, the fate of these folks lies at the tender mercies of the House GOP. Kind of like being at the mercy of hungry polar bear. However, this is where I have a real problem with Sumner. All he ever does it tell us 'don't worry the Fed can offset this by more QE, or forward guidance or if it does NGDPLT or starts an NGDP futures market.'

    What this does is make the sad fate of all these long-term unemployed folks invisible. He basically denies their pain-it's like the misogynist-ie, woman hater-who comes up with all kind of clever tricks to try to convince us that don't' worry, not too many women are getting beat by their husbands so let's just forget about it.

     I don't buy that the Fed can by itself give us the optimum recovery from a Great Recession like we've had. However, even if it could this wouldn't mean we shouldn't do things like UI anyway. I mean the government would still have good reasons to want to help these suffering people-for one thing there are all kinds of social blowback that can incur, like more crime, vagrancy, a society with much more problems. Even if the Fed could totally deal with our AD problems there would still be the vexing question of distribution.

     Some like Mark Sadowski and Tom Brown tell me that Sumner just wants us to do his NGDPLT scheme and he leaves our fiscal policy to us-or at least our politicians. However, by criticizing anyone who criticizes something like allowing UI benefits to lapse-he never stops about how long 99 weeks or 73 weeks supposedly are-he's giving aid and comfort to these House Republicans whether he wants to or not-and I'm far from convinced he doesn't want to.

    "When Congress allowed extended benefits to lapse in December, 1.3 million Americans, including 13,699 unemployed Long Islanders, were left without the income. In the months since, more than 4,135 Long Islanders have come to the end of their 26 weeks of state benefits without the prospect of any federal help. Under the recent emergency compensation program, benefits -- including both regular and extended benefits -- had at one time lasted as long as 99 weeks in states where unemployment was worst but had been limited to 73 weeks by the time extended benefits ended in December."

     "Federal benefits have supplemented state benefits in times of high unemployment since 1970, with full federal payment for extended benefits enacted in February 2009. Extended benefits with costs shared by federal and state governments can be triggered when unemployment rates spike, but none are in effect. About 28,500 Long Islanders currently receive regular state benefits, and each week more will see those benefits expire, leaving most with little or no income."

     "The state Labor Department recently reported that Long Island's unemployment rate had dropped to 5.9 percent in January, compared to 7.7 percent a year earlier."

     "But the good news hasn't yet helped a 40-year-old Suffolk County woman, who asked to be identified only by her middle name, Jimena. She said she never expected she would still be unemployed more than a year after losing her job as a sales rep making $70,000 a year plus commissions."

     "I haven't gotten unemployment insurance since December, and now I don't have a dollar to my name," she said, noting her savings are depleted and her credit cards are nearly maxed out.
"For the last month and a half I haven't been able to sleep; I don't eat anymore. It's just like everything is worrying."

     She added, tearfully, "I feel like I'm in a hole and I don't know how to get out."

     Sumner's answer would be, don't worry you can eat QE.

     "For Jimena, the Suffolk woman, the $375 a week in unemployment benefits at least paid the rent on the apartment she shares with her daughter, 19. Now, without the benefit and her own resources, Jimena said she puts as much as she can on credit cards, gets occasional help from friends and the local church, and $189 a month in food stamps that don't go very far."

     "I never realized how hard it was to find a job until I was in that situation," she said, scoffing at those who suggest unemployment benefits make it easy for people to avoid having to get a job. "They don't know what they're talking about." She is hoping for a second interview for a sales job.
Puzzele, who said she loved the restaurant job she held for more than a decade, agrees. "When I hear on the news, it makes me upset to the extent that people in Congress say that people are lazy," she said. "But when I go to unemployment [office] most of the people there are older."
Feelings of anger and abandonment can haunt those who find themselves in distress after a lifetime of steady work and independence, people like Ann, 51, a Suffolk woman who asked that her full name be withheld to protect her privacy and job prospects after eight months of unemployment.
As a voter who had leaned Republican, she said she was "shocked" by the lack of support for extended benefits among the GOP in Congress."

     "People who had relied on unemployment insurance, she said, "are the people who are workers, the backbone of our society, and you are turning your back."

      Ann was clearly completely out of touch with reality coming in to this if she's surprised much less shocked that the Republicans would do this. It's what they live to do, they believe they're selected by God to do it and Sumner continues to throw whatever aid and comfort he can there way. 


  1. Sax,

    C'mon man

    1. Monetary can do more than Fiscal.
    2. Fiscal, unless done RIGHT, is WRONG. and likely hurts.
    3. That DOES NOT MEAN, that NGDPLT instantly assure everyone has a job.
    4. Ultimately, Fiscal has to be done right.

    Let me give you an example: Say we have 4.5% NGDPLT running for next 5 years, and unemployment has been running at 5%, and then Congress decides to raises Minimum Wage to $20.

    NGDPLT will continue to stay on 4.5%, it won't miss. BUT unemployment will skyrocket to 20%.

    The point is, like I mentioned on Scott's blog many times, and Scott has agreed, and you just wrote about, so you should understand this: With NGDPLT in place MP won't / can't make any old horrible Fiscal policy Congress enacts WORK.

    It just will be do the most it can, and do better than any other given choice we have today for MP.

    And when I "crow" that NGDPLT is good for conservatives, what I mean is it FORCES Dems to do Fiscal policy that keeps inflation low and keeps people employed.

    But you shouldn't act like Scott is promising the NGDPLT puts a chicken in every pot, or that he's "giving aid and comfort" to the wrong side.

    Newsflash: 73 and 99 weeks of unemployment is nuts. It is nuts BECAUSE we have another plan in the offer that is BETTER FISCAL policy.

    You are the one giving aid and comfort to Dems, by not forcing them to look at GI?CYB and saying "GUYS!!! adopt this, so unemployed people stop losing skills and get to consume more stuff!"

    My pint is, if you are a vocal screaming GI/CYB (wage subsidies) cheerleader AND until that happens you want to extend UI, that is one thing...

    But UI proponents at this point have a moral obligation to be admitting this isn't the best way to do welfare. It is sub-optimal fiscal policy.

  2. "Newsflash: 73 and 99 weeks of unemployment is nuts. It is nuts BECAUSE we have another plan in the offer that is BETTER FISCAL policy."

    Well until we do I think cutting off these benefits right now is what is nuts. I think the House GOP has a moral obligation to do something here but of course they're not worried about it.

    I'm not sure but it seems like you might be missing part of what I'm saying here. It's not just a question of AD. I mean the Sumner claim is that all we need to do to refurbish AD is MP and that FP isn't needed.

    Now I actually haven't bought into this-you claimed at top that MP trumps FP but why exactly? Basically it's my whole point-it gives conservatives what they want politically. As I'm not a conservative I don't see why should prefer MP.

    However, in this post my point was that Sumner basically denies the existence of these people profiled in the Newsday piece-it was about Long Island but there are millions like this across the nation. He just says their misery doesn't matter just do more QE or Forward Guidance or NGDPLT or do futures.

    However, supposing it does fully support AD-the pain of these people is still real. This is why the issue of distribution can't be ignored and monetary policy can't speak to that at all.

    I'm saying that even if Sumner can give us 4.5% NGDP-I don't like such a low target but it's your preference; when he started Sumner at least wanted a higher target of like 6%-it still doesn't erase stories like this.

    Morgan you got to be honest-I'm not putting words in Scott's mouth, he did admit himself that the GOP would love him if only they understood what he was really saying. For me right now, that's the wrong side.

  3. Yeah, I get that you're argument is to do the GI but for now that's just a theory even if it is an interesting one. I can't simply ignore what actual policy currently is. As things are now, UI benefits is preferable to the alternative-nothing.

  4. I'm not "sure" on UI, what I am sure of is people aren't publicly supporting NGDPLT as well as GI/CYB and they are saying, "let's extend unemployment!"

    I'm against them.

    I'm not willing to let them have it that easy.

    North Carolina proved that the "misery" or ending UI may be real, but even MORE REAL is lots of people went and got jobs, far more than the left is reporting:

    Again, if you REALLY care about the unskilled and unemployed, you prove it by be hyper interested in PROVING the only people getting help - aren't being lazy.

    If you generally, kinda want to not worry about the lazy bit, since there are non-lazy suffering - you are SCREWING the non-lazy, bc you are hurting your argument to the half of voters WHO CARE about not letting people be lazy.

    I really think you ought to read Haidt and let it help to inform your view of the political parties.

    You may hate Republicans, but that's not really an "educated" approach to this stuff.

    In my experience, and I'd bet yours too, is some of the most giving and generous people are conservatives BUT ONLY AFTER they have convinced themselves the person asking for help is really trying to help themselves.

    And since 90% of the poor are really trying to help themselves, it BEHOOVES you to be willing to use technology to find and identify the bad 10% hiding amongst the 90% goodies, bc it MOVES conservatives - it is almost Pavlovian.

  5. Sax, we're talking about HOW TO MAKE THE ECONOMY GROW.

    We're not talking about inequality, welfare, entitlements, or any of that.

    And on that subject what Scott, and i suspect you, believes is that MP trumps Fiscal on that one metric.

    I doubt very seriously if you put a fMRI cap on Krugman or Stiglitz, pointed a gun at them, and said if this machine says you lie, you die....

    That any of them would say MOAR Fiscal spending grows the economy better than MP done the right way.

    They, like you have OTHER concerns besides the growing economy, which keeps them from being honest about that one single subject.

    That's why Sumner scores so many direct hits on his analysis that MP neuters Fiscal, bc nobody really disagrees with it. They just feel like it's in their interest - for the otter things they want - to insist on that thing they no to be false.

    To them, it is ok to lie about it - the ends justify the means.

    That's WHY NGDPLT is so dangerous to the less than truthful Krugman, Summers, DeLong, what it actually does is REMOVE the MP discussion from the table.

    Right now when we all talk econ, there's these confusing Fiscal / Monetary stuff, everything slides around... the confusions enables folks to be less than consistent.

    But if MP is off the table... if rain or shine, the economy grows pretty well enough, to cool passions THEN the only thing left to make policy on and discuss is FISCAL.

    Great Depressions and great recessions not possible. Massive bubbles, not possible.

    What left to discuss?

    How much of the 4.5% NGDPLT is Real Growth and how much is inflation?

    And the thing that determines that?

    Fiscal Government Policy

    Economics as a science moves forward, because now people can't blame Monetary for Recessions or take give Monetary credit for Real Growth.

    If we've been dong NGDPLT for 10 years, and a we're getting lots of inflation, no growth, the political party in power - IS TO BLAME.

    If we are getting tons of Real growth and no inflation - the political party in question has proven its point. It has the superior ideology.

    But in and of itself, NGPLT doesn't benefit the GOP. In and of itself, NGDPLT just says, ok guys lets settle this once and for all.

    AND THAT likely makes some people who REALLY LIKE Technocracy very nervous.

  6. "You may hate Republicans, but that's not really an "educated" approach to this stuff."

    Sure it is once you educate yourself about what Republicans are about. People who think it's radical to let a rape victim have an abortion. What has NC proved? We knew from the start that if you simply end UI benefits then the official unemployment number would look better-of course it will as now a lot of people who were considered unemployed are no longer considered part of the job market. Sumner himself admitted this.

    I don't need to prove that it's possible to be non-lazy and still be out of work for an extended period of time. I've been there done that. I'm really not too worried about convincing such people who are still not sure about this.

    "I'm not "sure" on UI, what I am sure of is people aren't publicly supporting NGDPLT as well as GI/CYB and they are saying, "let's extend unemployment!"

    I like that-I'm not allowed to say UI shouldn't have been cut unless I go along with your agenda. It's an interesting form of intellectual blackmail but it's going to take a little more than this.

    What can I tell you? Listen I give you credit for presentation and I even find it food for thought. However, take it from a telemarketer who does it all day, you haven't closed me just yet-if you've closed others fine.

    On UI I really just don't think that conservatives are in touch with reality. I mean when I was on UI what I got on a weekly basis was a pittance. It certainly didn't make me think-'wow, now I'm on easy street, I guess I will live in my parents basement forever now and just pocket this cool $133 dollars a week.'

    I wanted a job in the worst way and a time like 2011 was really tough as I was basically out of work the last 8 months of the year. So I know this UI benefit is no great enticement.

    Now true, I wouldn't have taken a job that paid even less than this after taxes but I was hellbent on finding one that paid more and eventually I did.

    What I don't get is that if you assume that 10% are lazy it's worth sacrificing the 90% that aren't.I mean if someone somewhere is lazy and doesn't work-why is that such a big problem?

    They had an MMT style public works program in Argentina and overwhelmingly what they found is most people want to work. So any chronically lazy people are the minority. Why let concern over them wag the dog?

    Why not forget the trees and look at the forest?

  7. "Sax, we're talking about HOW TO MAKE THE ECONOMY GROW.

    "We're not talking about inequality, welfare, entitlements, or any of that. And on that subject what Scott, and i suspect you, believes is that MP trumps Fiscal on that one metric."

    No I really don't. I mean this has been a very slow recovery and we've done a hell of a lot more MP than we have FP. Yes we had ARRA in 2009 but that was one year followed by 4 years of austerity. So we've net contracted fiscal policy during this recession. On the other hand we've done a lot more MP.

    So I'm not won over that MP can end the business cycle and bubbles. On inequality you want it to be a neat discussion-we can just put that to one side and just talk about growth. Yet it's not so simple. Robert Reich suggests that part of what got our economy so dysfunctional is the rise of inequality over the last 30 years.

    In theory it gives the GOP what it wants. If the point is that we have to cut government then obviously this is what they wanted in the first place. I've seen suggestions that the Dems could function within the MM framework-you and Sadowksi have make this argument. However, I don't see any way that they'd do better in such a straitjacket than without it.

    Morgan, buddy, I like you but I got to be honest. This is a strong gambit by Sumner. However, as much as he wants to believe that public opinion doesn't matter in economics, this is a democracy-unlike Chile where we had the real Monetarist experiment.

    I'm not so clear that within a few years the GOP wont lose it's ability to be a fly in the ointment on any kind of progress whether economic or social. For one thing, they have as is typical for them defiantly learned nothing from 2012 but have no tabled immigration reform and claiming that they'll be able to somehow convince anyone that it was the Democrats who killed it by not giving into their demands.

    In the next 10 to 20 years we'll get here I think. Liberals may get a better deal this way. I see the liberal hand as strong enough that there's no need to accept any table scraps at this point.

    I see your argument on the idea that the labor market has changed as interesting. However, even so, it's not clear why the MW is the culprit. Australia has a very high MW and are doing fine.

  8. Sax, the biggest argument I had with Scott was about how it was smart for GOP to leave Dem POTUS with a recession, so he'd have to cut government spending.

    Basically, I expected Obama to have to do a "end welfare as we know it" - just like Clinton had.

    And when I look at the current "recovery" taking so damn long, I 1) wish we had moved to NGDPLT 2) blame Obama for not pulling a Clinton.

    Public opinion doesn't matter.

    It absolutely matters in the sense of we have to craft policies that can pass, this is 100% true.

    But "public opinion" has no love of Minimum Wage compared to a GI/CYB.

    The millennial creative class laden Occupy Crowd, the Congressional Black Caucus, the Tea Party - ALL OF THEM, dude the bases of both parties, would LOVE to have a Guaranteed Income where every welfare recipient has to work.

    Make no mistake, GI/CYB or some close variant is a technological certainty.

    Like P2P to hollywood, or Bitcoin to Money or "cloud" to personal computers or MOOCs to edu or Amazon to retail or Netflix to broadcast TV...

    GI/CYB is to welfare. It just happens, and the first place it happens, the productivity consumption gains are so great, it spreads.

    It'll even happen in Australia.

    Note: ask Scott this, he'll tell you, NGDPLT will ALSO make the economy suffer less with a higher minimum wage (see Aus)... that doesn't make MW right, but it should open your eyes to the strength of MP.