Matt Yglesias

36 Responses to “More Stimulus”

1. DWN Says:
   October 13th, 2008 at 5:22 pm

   Sure, but it will cost more per person if there is any kind of wage attached. Those unemployment benefits are fairly minimal.

2. Linkmeister Says:
   October 13th, 2008 at 5:30 pm

   Obviously you’ve never been in a position where you’ve needed those benefits. I have, twice. Knowing you’ve got some income to help pay for the gasoline/mortgage while you’re looking for work (particularly in a recession) eases the mind and takes the look of desperation off your face during interviews.

3. trza Says:
   October 13th, 2008 at 5:35 pm

   Good point.

   Regarding your previous discussion of federal help for states, another important thing to note is that federal taxes are largely depended on income tax revenue and are significantly less regressive than state and local taxes, which rely heavily on sales and property tax revenue. If federal revenue injections forestall increases in regressive consumption and property taxes, then lower income citizens will have more money to spend. This would further increase the economic multiplier of these policies. This is another argument in favor of this policy.

4. JonF Says:
   October 13th, 2008 at 5:44 pm

   Is Matt buying into the rightwing argument that people on unemployment would rather slack on a paltry $1200 a month (or less) than go back to work? People who make that argument never tried to live on $1200 a month (at least not since they were in college and had parents paying all the really big bills) or they would know it for the howling nonsense it is.

5. Joel Says:
   October 13th, 2008 at 5:47 pm

   I’d note, the same argument could be made against trust funds, Matt.

   But, more to the point, in the midst of an economic downturn the drag isn’t that people aren’t accepting jobs it’s that a positive feedback loop of cost cutting and reduced economic activity has taken hold. Unemployment benefits are more likely to be spent than most other income transfers, including tax cuts for middle class or rich people. Further there is a case to be made that allowing people more time to search for employment aids them in finding a job better suited to their skills and therefore will be more productive.

6. Calderon Says:
   October 13th, 2008 at 5:52 pm

   My modest plea for today is that (which applies to nearly all bloggers, so not meaning to single you out) is that when bloggers say that “research indicates,” “evidence shows,” or they just assert some non-obvious fact, that they please include a citation so the readers can look it up. This would be a good rule for commenters as well, but that’s clearly too much to ask for.

7. howard Says:
   October 13th, 2008 at 5:54 pm

   even in boom times, aligning work supply and demand is no mean feat, in large measure due to all the structural disincentives (like home ownership, child situated in school, etc.) that militate against relocating (something harder for a young person without family obligations like matthew to understand). and these ain’t boom times.

   at some point, you need to be off unemployment and either employed or actually on welfare, but extending unemployment benefits is a simple, low-cost stimulative measure.

   plus what most of the others have already said.

8. Dan Says:
   October 13th, 2008 at 5:56 pm

   I think the correct phrase is, “measuring for drapes.”

9. pete Says:
   October 13th, 2008 at 5:57 pm

   As Joel noted earlier, unemployment benefits can make the labour “market” more efficient because longer searches result in more effective matches.

   Unemployment benefits (as well as minimum wage increases) also push wages up, which forces employers to invest in improving productivity.

10. burritoboy Says:
    October 13th, 2008 at 6:03 pm

    “Basically, we should be spending money to put people to work doing something useful — infrastructure! — not giving them money that’s conditions on their continued idleness.”

    Multiple problems:

    1. In a more typical, healthy economy people who are unemployed often wouldn’t particularly want to be put to work on infrastructure projects – because their skills might not be particularly useful on infrastructure projects. Making a software programmer dig ditches (say, because the infrastructure project doesn’t need programmers at the moment, but they do need ditches) isn’t going to do much for him or her if there is a reasonable prospect she can find a job as a programmer. (obviously, she’ll take the money for digging ditches if she absolutely needs it, but don’t expect her to have a lot of overjoyed happiness at the prospect).

    2. The infrastructure projects of the New Deal worked because the people taking those jobs had been unemployed or grossly underemployed for many many years – i.e. they had always been relatively low-skilled workers or their skills had drastically degraded due to their underemployment. Thus, just taking any regular job upgraded their prospects. That’s not the case at the moment (i.e. we aren’t 3-5 years into the Great Depression).

    Ideally, what you would want to do with this type of thing is not only provide make-work jobs. A big component of the success of America after WWII was that the New Deal government jobs programs trained people significantly – i.e., it wasn’t just that they got critical paychecks but the programs were (ideally) designed to take people up the skills ladder.

11. pete Says:
    October 13th, 2008 at 6:06 pm

    For Calderon, Daron Acemoglu, Good Jobs versus Bad Jobs.

12. Bondo Says:
    October 13th, 2008 at 6:27 pm

    Growing Public is the ideal tome on social spending effects IMO. Unemployment benefits/welfare are slightly inefficient, but they also subsidize the least productive workers at a given time, so the macro economy doesn’t lose a whole lot.

    That said, I’m always a fan of universal benefit over need-based benefit because it does provide bad incentive. Moving from 99% of poverty level to 101% results in a loss of certain benefits greater than that 2% of earning value. Similarly, crossing other thresholds for benefits (150%, 180%, etc) have the same effect where making a marginal improvement in earnings actually decreases their well-being. It isn’t a question of them being lazy, it is a question of them not being stupid and policy incentives being bad.

13. Elizabeth Says:
    October 13th, 2008 at 6:28 pm

    The bigger problem with depending on extended UI benefits as a stimulus is that only about 1/3 of workers who lose their jobs receive unemployment benefits. And it’s even lower for low-wage workers and those in jobs that are inherently unstable, because you have to hit an earnings threshold over multiple quarters of employment to qualify. And in about half the states, people looking for part-time work are categorically ineligible. So, extended UI benefits doesn’t reach any of the people who aren’t eligible for unemployment insurance in the first place.

    And “welfare” doesn’t really exist in this country for people without kids, and barely exists for people with kids.

14. serial catowner Says:
    October 13th, 2008 at 7:16 pm

    So much wrong with this post, and a lot of it revolves around the idea that $1 invested in Wall Street tycoons is more efficient than $1 invested directly in the economy. Because, as we’ve seen, tycoons multiply your money.

    In reality, there might not have been a big crisis if people hadn’t been gong bankrupt from medical expenses, suffering chronic unemployment, and paying soaring fuel costs. The unemployment recipient is just a cutout- you give them money and they give it to someone else- usually on the same day.

    And for the poor, the criticism cuts both ways. Matt thinks here they’ll just lay around swilling down the PBR instead of returning to work and paying down their credit cards. But when the tax stimulus went out, the criticism was that instead of buying things, they were paying down their credit cards.

    At some point you need to combine a sense of basic fairness and sympathy with the realization that benefit extensions will not, in any case, be that big a part of the package. There’s no real point in worrying too much about “some evidence” of a “non-trivial” effect that may exist. We’ve got bigger fish to fry.

15. DWN Says:
    October 13th, 2008 at 7:25 pm

    Actually Linkmeister, yes I have. That is how I know they are fairly minimal. I did not say unimportant. Big difference. Specifically, I noticed wages far outstripped unemployment. This is why, I believe, our government does not take Matt up on his suggestion, although he has a definite point. I also noted that looking for a job is a full time activity. Matt’s point seems to suggest that looking for a job, something my unemployment office required of me and that I took very seriously, is unproductive. I am not sure that is correct either.

16. Linkmeister Says:
    October 13th, 2008 at 7:31 pm

    DWN, I was addressing Matt, not you. Sorry if that wasn’t clear.

17. lucretius Says:
    October 13th, 2008 at 7:58 pm

    the typos / solecisms are making this blog borderline unreadable: it’s as if yglesias has been infected with a mutation of the palin disease.

    there’s a point at which syntactical chaos debases the thinking that it’s vainly trying to render.

18. Adirondacker Says:
    October 13th, 2008 at 8:04 pm

    I haven’t checked what the requirements are for extended unemployment benefits are recently but when I was eligible you had to consider any work you were capable of – in other words if a dishwasher position was offered to you, even though you had been a computer programmer, you had to take it. You also had to document that you had contacted at least 5 employers every week and it couldn’t be exclusively by sending off a resume via the mail. You had to be actually visiting them for things like busboy.
    Also extended benefits usually aren’t as generous as regular benefits, it depends on the state. They are usually much lower.
    … and they don’t go as far as they used to. Unless you have a spouse who can put you on their health insurance plan you have to pay your health insurance premiums out of the unemployment benefits…

19. rapier Says:
    October 13th, 2008 at 8:10 pm

    It’s fun to go all market fundamentalist, in an old fashioned way. Wherein a post modern writer, ie. entertainer, suddenly discovers that making things, roads etc. are what really produce wealth.

    What exactly does a blog produce?

    Unemployment payments flow into the economy on the demnd side. Electric bills get paid. Peanut butter is purchased and consumed. That produces second order systematic stimulus, not as good as directly producing something admittedly, but pretty nice if you like to have lights in the house.

    Extending unemployment benefits, which are insurance by the way and when extended by the Feds have always been paid back I think by the states, is cheap. Many people absolutely need it for a time. Nuff said. Going all market fundamentalist on the topic is silly. The bonuses that went to Wall Street last year would easily pay for the extension and what did they produce. Oh yea. Several trillion dollars in US government debt. Well on the demand side a lot of really nice homes and some yachts, some planes, some exotic cars, etc. etc.

20. dougR Says:
    October 13th, 2008 at 8:34 pm

    Matt– you say you like the idea of extending unemployment benefits less and less “the more I learn about it.”

    Learn about it from who exactly?

    I have a prescription for what ails George Will: rip off his bow tie and his tweeds and his smugness, stick him in coveralls, and let him work on a loading dock for about six months. He gets to live ONLY on what he makes, he gets a $700 car to drive around in, and IF he can get housing (as opposed to living in his car) more power to him.

    I’m not sure what the prescription is for you, Matt, but I think it’d be somewhat similar. I think you have some responsibility to consider the real-world consequences of stuff you write about. Unemployment insurance is a good case in point.

21. JonF Says:
    October 13th, 2008 at 8:51 pm

    Re: The bigger problem with depending on extended UI benefits as a stimulus is that only about 1/3 of workers who lose their jobs receive unemployment benefits.

    I would like to see some documentation of this because it sounds wrong assuming we are talking about full-time adult workers who are not also working second jobs). I have never knopwn anyone who was laid off from a job (as opposed to being fired for provable malfeasance or quitting vountarily) who did not get unemployment benefits. Your 2/3 figure probably includes college students (ineligible because they are in school), other part-timers, and people who quit their jobs.

    Re: And “welfare” doesn’t really exist in this country for people without kids

    Yes it does, we just call it “disability”.

    Re: you had to consider any work you were capable of – in other words if a dishwasher position was offered to you, even though you had been a computer programmer, you had to take it.

    As a practical matter this is almost never enforced because it’s unenforceable. The unemployment bureaucracy asks recipients if they have been looking for work and 99% of the time simply accepts “Yes” as an answer without any follow-up. Even when there is a follow-up they require only that you have applied for at least two jobs* a week, and firing off a resume to an email address counts as an application. The unemployed person has almost complete freedom over which jobs s/he applies for, and when the unemployment office does recommend jobs (and you are expected to apply for these, through their own online service), these will be within the (general) experience field of the recipient. Programmers are not forced to apply for dishwasher jobs. They also do ask if you have turned down any jobs, but once again they simply accept No as an answer as there is no practical way to verify your answer.

    * That at least was the standard in Michigan and Ohio where I collected benefits, and sending resumes by mail, fax or email was completely acceptable if that is what the hiring company instructed applicants to do– it would be incredibly bizarre if the unemployment office told you toi disobey employers’ application instructions! I was advised of course to keep a record of applications, and I did, but I was never asked to submit this record; in fact I only had to go in to the Unemployment office once, to start my benefits– all other followups were by phone (automatically processed) or online.

    Re: You had to be actually visiting them for things like busboy.

    I have to call total bullshit on this. Unless your previous job was in resturant work you aren’t referred to busboy jobs or expected to apply for them.

    Re: Also extended benefits usually aren’t as generous as regular benefits

    I received extended benefits from OH in 2002– they were the same as regular benefits.

22. jeff Says:
    October 13th, 2008 at 9:29 pm

    Infrastructure spending and providing employment is the most important and useful method for a stimulus.Agreed.

    But the talk of continued idleness is laughable.

    This strain of thought is not only pervasive in our journalistic community but also academic and research fields. The most significant problem is the clear lack of participatory observation, or more simply, real life application. The behavioralist, econometric, statistical models–and their attendant isms–that create this punitive thinking rarely, if ever, have any real life application.

    Thus, the “real evidence” Matt speaks of is not only absent any actual learned experience–a significant issue for “real evidence”–but poisoned by an ever converging consensus that knows almost nothing of the world it claims to speak.

    I would agree that unemployment benefits are not per se the solution, or of excessive importance to this stimulus, but the notion that unemployment benefits, which allow people to survive, look for work, and keep the lights on are detrimental is a significant departure from reality. Pretty important stuff.

    It also suggests that “progressives” and other “liberals” ought to move from behind the veil of the so called “evidence” and scholarly veneer they bury themselves in and engage in these issues more personally.

    But I hope the drape shopping goes swell.

23. Neil the Ethical Werewolf Says:
    October 13th, 2008 at 9:37 pm

    And you posted it too, Matt! What part of 1.64 do you not understand?

24. jeff Says:
    October 13th, 2008 at 10:08 pm

    Dear burrito boy,

    1) While your software engineer straw man rings a bit true–too many tech people have been marginalized. You betray a fundamental understanding of the current labor market. Millions of trained construction workers exist and are either marginally employed or completely unemployed. Nearly 400,000 construction jobs were lost in the last year alone. Put simply, their are plenty of able bodies for the work and no one is trying to retrain high tech workers to “dig ditches.” However, engineers do, and will, play a significant part in infrastructure creation today and in the future. So a role for so called skilled workers does exist.

    2) The notion that there is not a populace of long-term unemployed or chronically underemployed workers borders on mean spirited. But I begrudge you no ill will; you seem wholly ignorant to this phenomenon. In cities across America, labor market dropouts are the rule, not the exception. With 1/3 of prime age african american males deemed “ex offenders” and about 50 percent of the same cohort being long term unemployed labor market dropouts, suggests quite the contrary. Systemic labor market disenfranchisement is very real and sad. I suggest you venture to your local troubled neighborhood and take a stroll, you may be surprised. And this is not merely race specific. The lower down the income latter the more likely men of all stripes are to be underemployed or labor force dropouts. So, put delicately: you are wrong.

    3)As far as upward mobility, it can exist if the current strictures on unionization as well as a true long term infrastructure plan, which includes “green” infrastructure, are lifted and implemented. In fact, an apprenticeship construction job can provide for a family, and should be encouraged as part of longer term stimulus.

    So yes, an infrastructure stimulus is key and neither outdated or impractical. On this, MY and I agree most sincerely agree.

25. david berger Says:
    October 13th, 2008 at 10:27 pm

    matt-

    are you up to speed on the most recent theorectical/empirical work on the optimal amount of UI benefits. Prof. Raj Chetty, as usual on public finance topics, is the person to read first. I would check out this recent paper

    http://elsa.berkeley.edu/~chetty/papers/mh_liq_ui_jpe.pdf

26. max Says:
    October 14th, 2008 at 3:43 am

    [Reads Chetty paper. Huh.]

    There’s some real evidence that the bad incentive structure extensions creates does a non-trivial amount to undercut the stimulus effect.

    This is one of the tradeoffs with UI. That said, while it may delay reuptake, that seems to stem mostly from people trying to find jobs comparable to their old jobs, rather than anything else.

    At any rate, it would be helpful to do a lot of infrastructure spending, but in the absense of that, UI is the only anti-dislocation measure we have. I would be fine if we curved UI benefits (such that we start at near salary levels and the benefits fall over time), rather than a flat less-than-salary model.

    Right now, we have no infrastructure spending, and lots of dislocation, so extending UI benefits is not going to kill anybody. (Keep in mind: to get employment increase effects similar to the anti-dislocation effects of paying a given amount of total UI, the amount of infrastructure spending needs to be much larger than the amount of UI.)

    max
    ['So, in the circumstances, extending UI to position for next year is fine.']

27. Luke Says:
    October 14th, 2008 at 8:26 am

    I hate to go off-topic somewhat, but can I point out that while the nation needed bridge repairs and green technology, the free market gave us the iPhone. So, if we want people “put to work doing something useful” can we once and for all say that the market is inefficient at that?

    As far as UI goes, 1.64 to 1, Matt.

    What’s more, if we don’t provide ample UI (and we currently don’t) then skilled people (construction workers) will take crappy jobs (waiting tables) and leave us deficient in those skills when command infrastructure plans are laid out.

    You might say, but those waiters will quit and go back to construction, to which I say “The Free Market Is Not an Efficient Means of Labor-Use Distribution”.

28. burritoboy Says:
    October 14th, 2008 at 12:37 pm

    “While your software engineer straw man rings a bit true–too many tech people have been marginalized. You betray a fundamental understanding of the current labor market. Millions of trained construction workers exist and are either marginally employed or completely unemployed. Nearly 400,000 construction jobs were lost in the last year alone. Put simply, their are plenty of able bodies for the work and no one is trying to retrain high tech workers to “dig ditches.” However, engineers do, and will, play a significant part in infrastructure creation today and in the future. So a role for so called skilled workers does exist.”

    You’re misinterpreting my argument. It’s simply that infrastructure projects may create jobs that are very different than the unemployed population’s skills or career plans. Of course, it’s also possible that the infrastructure projects will create jobs that are a better or good fit with those skills or career plans. But it’s not a certainty that there will be a good fit.

29. Adrock Says:
    October 14th, 2008 at 2:07 pm

    My dad is a software engineer who lost his job 3 months ago and would happily pick up a shovel if it made him close to 75% of his previous wages. But it unfortunately wouldn’t, and as some have said, there are already enough unemployed workers for those jobs available.

    Luckily, my mom is still employed by the public school system and so they have health benefits. Their mortgage is nearly paid off and they have a second home that they are currently trying to sell (in this awful market.)

    Most importantly, the state of MA is paying him close to 30% of his salary for about 28 weeks and its the only thing keeping them afloat right now. If he lived in NH, he would be getting 400/mo max. The situation seems so dire that we’ve offered for him to INTERN (at 58) at my company for FREE.

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