Commentary Magazine


Topic: unemployment insurance

Clueless on Job Creation

As John has noted, the new unemployment numbers are not good news, with the rate moving up slightly in November to 9.8 percent. But the White House will likely use the uptick in unemployment as an effective bargaining tool to insist on yet another extension of unemployment benefits. Workers who lost their jobs used to be able to count on only 26 weeks of unemployment insurance — benefits paid for by employer taxes to states and administered through taxes paid to the feds. But we now have 99 weeks of UI available to the unemployed, the additional 73 weeks paid for by the feds. But the federal guarantee ran out on Dec. 1, and the White House wants to extend it for another 13 months in return for agreeing to a temporary extension of the Bush tax cuts.

It’s hard not to sound like Scrooge to suggest that extending benefits is a bad idea — but it is. Most economists agree that extending benefits can actually increase the time workers remain unemployed, which is reason enough to resist the pleas for yet another extension. Extending benefits also means higher UI taxes for employers. There have been steep increases in UI taxes over the past couple of years in many states, as state trust funds for benefits have been depleted. Employers who might want to hire new employees end up instead paying more for workers who’ve been let go. Once again, the Democrats demonstrate that they don’t have a clue about how to create jobs. But the politics of this one are probably too difficult for Republicans to resist.

As John has noted, the new unemployment numbers are not good news, with the rate moving up slightly in November to 9.8 percent. But the White House will likely use the uptick in unemployment as an effective bargaining tool to insist on yet another extension of unemployment benefits. Workers who lost their jobs used to be able to count on only 26 weeks of unemployment insurance — benefits paid for by employer taxes to states and administered through taxes paid to the feds. But we now have 99 weeks of UI available to the unemployed, the additional 73 weeks paid for by the feds. But the federal guarantee ran out on Dec. 1, and the White House wants to extend it for another 13 months in return for agreeing to a temporary extension of the Bush tax cuts.

It’s hard not to sound like Scrooge to suggest that extending benefits is a bad idea — but it is. Most economists agree that extending benefits can actually increase the time workers remain unemployed, which is reason enough to resist the pleas for yet another extension. Extending benefits also means higher UI taxes for employers. There have been steep increases in UI taxes over the past couple of years in many states, as state trust funds for benefits have been depleted. Employers who might want to hire new employees end up instead paying more for workers who’ve been let go. Once again, the Democrats demonstrate that they don’t have a clue about how to create jobs. But the politics of this one are probably too difficult for Republicans to resist.

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Nobel Prize Winners — a Teachable Moment?

A trio won the Nobel Prize for economics — Peter Diamond, Dale Mortensen, and Christopher Pissarides. Diamond’s nomination to the Federal Reserve Board has been held up by Republicans; whatever you think of the Nobel committee’s standards in economics, it will be a tad difficult to maintain the position that Diamond is not “qualified.” There may be other objections; if not, I suspect he’ll be confirmed.

But what is interesting is the substance of these economists’ work. The Wall Street Journal reports:

The research by the three economists concluded high unemployment can be the result of “friction,” which keeps employers and workers apart. That friction can be tough regulatory rules on firing, or the lack of appropriate skills among the unemployed, among other things.

The research has also focused on unemployment insurance, with one conclusion being that more generous benefits give rise to higher unemployment—because workers spend more time looking. This ultimately is a benefit to the economy, however, because it leads to workers landing jobs that better use their capabilities.

Hmm. Well that’s sort of interesting. So, for example, union rules that hinder termination of workers or a tort system that aids litigation by fired employees could worsen unemployment? Good to know. The most interesting, and politically significant, part concerns unemployment benefits.

Now, one of the winners was quick to add that “in today’s difficult economic climate, he doubted that unemployment insurance was much of a factor in high unemployment now. ‘I really don’t think this is a time to worry about that all that much,’ he said.” Umm. But didn’t he win a big prize for saying that this is a potential problem?

Here’s an idea: hold confirmation hearings for Diamond and ask him about his research and whether increasing the cost of labor (e.g., ObamaCare, minimum wage hikes), making the labor market less flexible (unionization), and extending unemployment benefits for years are helping or hindering our efforts to tame unemployment. If nothing else, it would be edifying.

A trio won the Nobel Prize for economics — Peter Diamond, Dale Mortensen, and Christopher Pissarides. Diamond’s nomination to the Federal Reserve Board has been held up by Republicans; whatever you think of the Nobel committee’s standards in economics, it will be a tad difficult to maintain the position that Diamond is not “qualified.” There may be other objections; if not, I suspect he’ll be confirmed.

But what is interesting is the substance of these economists’ work. The Wall Street Journal reports:

The research by the three economists concluded high unemployment can be the result of “friction,” which keeps employers and workers apart. That friction can be tough regulatory rules on firing, or the lack of appropriate skills among the unemployed, among other things.

The research has also focused on unemployment insurance, with one conclusion being that more generous benefits give rise to higher unemployment—because workers spend more time looking. This ultimately is a benefit to the economy, however, because it leads to workers landing jobs that better use their capabilities.

Hmm. Well that’s sort of interesting. So, for example, union rules that hinder termination of workers or a tort system that aids litigation by fired employees could worsen unemployment? Good to know. The most interesting, and politically significant, part concerns unemployment benefits.

Now, one of the winners was quick to add that “in today’s difficult economic climate, he doubted that unemployment insurance was much of a factor in high unemployment now. ‘I really don’t think this is a time to worry about that all that much,’ he said.” Umm. But didn’t he win a big prize for saying that this is a potential problem?

Here’s an idea: hold confirmation hearings for Diamond and ask him about his research and whether increasing the cost of labor (e.g., ObamaCare, minimum wage hikes), making the labor market less flexible (unionization), and extending unemployment benefits for years are helping or hindering our efforts to tame unemployment. If nothing else, it would be edifying.

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Back to the Future

Robert Reich, President Clinton’s secretary of Labor, has an op-ed in today’s New York Times in which he tries to explain why the recovery from the “Great Recession” has been so sluggish. He fails to do that, but the article is a window into why the Obama administration has failed so dismally in this area: liberals are hopelessly stuck in the past. And in order to remain so, they distort history and manipulate statistics.

As always, Reich blames the rich for making too much money, noting that while the top 1 percent had only 9 percent of total income in the late 1970s, today’s super-rich take in 23.5 percent. These figures are based on adjusted gross income reported in federal tax returns and so should be looked at carefully to see how they square with “compensation,” which is something very different. But Reich simply ignores the fact that whenever there has been a major technological development, from the full-rigged ship in the 15th century to the microprocessor in the 20th, there has always quickly followed an inflorescence of fortunes based on the new technology. This, inevitably, causes income inequality to widen. The poor don’t get poorer, the rich just get suddenly much richer. The more fundamental the new technology is, the more the gap will widen, and the microprocessor is the most fundamental new technology since agriculture 10,000 years ago.

Just look at the Forbes 400 list to see how many brand-new fortunes are based on the microprocessor. Seven of the top 10 are (neither Wal-Mart nor Bloomberg would have been possible without cheap computing power). Any attempt to flatten the income curve in these revolutionary terms and thus reduce inequality would inescapably reduce wealth creation.

He writes, “What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere.” That’s perfectly true. But the rich living in the Cayman Islands, China, and elsewhere do exactly the same thing, often investing in America, which enjoys robust capital inflows as well as outflows. We now have a nearly total global economy, especially when it comes to capital. Any attempt to change that would be disastrous for both the United States and the world. Read More

Robert Reich, President Clinton’s secretary of Labor, has an op-ed in today’s New York Times in which he tries to explain why the recovery from the “Great Recession” has been so sluggish. He fails to do that, but the article is a window into why the Obama administration has failed so dismally in this area: liberals are hopelessly stuck in the past. And in order to remain so, they distort history and manipulate statistics.

As always, Reich blames the rich for making too much money, noting that while the top 1 percent had only 9 percent of total income in the late 1970s, today’s super-rich take in 23.5 percent. These figures are based on adjusted gross income reported in federal tax returns and so should be looked at carefully to see how they square with “compensation,” which is something very different. But Reich simply ignores the fact that whenever there has been a major technological development, from the full-rigged ship in the 15th century to the microprocessor in the 20th, there has always quickly followed an inflorescence of fortunes based on the new technology. This, inevitably, causes income inequality to widen. The poor don’t get poorer, the rich just get suddenly much richer. The more fundamental the new technology is, the more the gap will widen, and the microprocessor is the most fundamental new technology since agriculture 10,000 years ago.

Just look at the Forbes 400 list to see how many brand-new fortunes are based on the microprocessor. Seven of the top 10 are (neither Wal-Mart nor Bloomberg would have been possible without cheap computing power). Any attempt to flatten the income curve in these revolutionary terms and thus reduce inequality would inescapably reduce wealth creation.

He writes, “What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere.” That’s perfectly true. But the rich living in the Cayman Islands, China, and elsewhere do exactly the same thing, often investing in America, which enjoys robust capital inflows as well as outflows. We now have a nearly total global economy, especially when it comes to capital. Any attempt to change that would be disastrous for both the United States and the world.

He writes:

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

The Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field.

Where do I begin? The depression that began in 1929 came out of a severe depression in American agriculture, caused by a revival in European agriculture and falling food prices owing to land once devoted to fodder crops for horses and mules being turned over to production of human food as the internal combustion engine took over the transportation and farm-equipment sectors. It did not come out of excess personal debt and a real estate bubble.

They didn’t know in 1929 that you could avoid immediate financial calamity by flooding the economy with money? Here’s what Benjamin Strong, governor of the New York Federal Reserve and effectively head of the Fed, wrote in 1928. “The very existence of the Federal Reserve System is a safeguard against anything like a calamity growing out of money rates. … We have the power to deal with such an emergency instantly by flooding the Street with money.” The problem was that the Federal Reserve didn’t flood the economy with money after the crash in 1929 (Ben Strong died in late 1928) but kept interest rates high. An ordinary stock market crash and economic depression were turned into the Great Depression by horrendous government mistakes, of which the Fed’s was only one.

And if the New Deal was the way back to full recovery, why did it take 10 years (and suddenly vast orders for war materiél) to achieve it? Robert Reich should read Amity Shlaes’s The Forgotten Man: A New History of the Great Depression, which pretty well demolishes the now ancient notions about the New Deal that liberals cling to, sort of like the way people in fly-over country cling to guns and religion.

He writes,

In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes.

Ah, the good old days of 91 percent tax rates on those rascally rich guys! Of course, those were mere nominal rates, the rich didn’t pay anything like that much, because deductions and other tax fiddles were nearly limitless in those days. All interest rates were deductible, for instance, allowing someone in the 91 percent bracket to borrow money and have Uncle Sam pay 91 percent of the interest costs.

I could go on, but you get the picture.

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Strange Herring

I know that Iran is close to getting a bomb, and the national debt now exceeds the number of calories in a KFC Double Down, and earthquakes are killing thousands of people worldwide, but this is serious.

Speaking of earthquakes, according to one expert, naughtiness causes them. Whether he’s an expert on naughtiness or seismic activity is unclear.

Blago wants the court to subpoena the president of the United States as a witness in his corruption trial. Just picture that scene… There are also all kinds of alleged allegations allegedly alleged against the alleged pres — the president.

If you’re looking to raise the I.Q. of your kiddies, Mensa’s here to help. Years ago I devised one of my own brainiac games. It was called Cromwell and was like chess, only the king, the queen, and the bishops were all dead. Two new pieces were added: this guy Phil and his young son Leonard, who played the lute. Tournaments could last years, as no one was sure of the object, given that pieces could not only move in any direction for any number of spaces but also across boards, even games, so that a knight could wind up owning Park Place. Needless to say, it failed to catch on, but it did catch fire, which landed me in court more than once. Then I turned 12.

Who needs nukes when you can have one of these thingees: “the Prompt Global Strike warhead would be mounted on a long-range missile to start its journey toward a target. It would travel through the atmosphere at several times the speed of sound, generating so much heat that it would have to be shielded with special materials to avoid melting.” Wow. That’s almost as fast as it took Benjamin Netanyahu to say feh to Obama’s mini-nukes summit…

Those animation farceurs Trey Parker and Matt Stone have had their lives threatened by an Islamic website, which is “annoyed” that Mohammad was depicted — in a bear costume. Never mind that Siddhartha Gautama has been shown snorting lines of coke, or that Jesus, whom Christians believe to be a divine person and not merely a prophet or a supremely enlightened avatar, is regularly reduced to, well, a cartoon. Given what was done to Dutch filmmaker Theo Van Gogh, the threat is no joke.

But wait: turns out Comedy Central censored the episode and saved their lives! — if not their artistic integrity. (All right, all right, but these things are relative, you know…)

Chachi has a Twitter account. And he definitely does not love Joanie, if Joanie is another one of those bleeding-heart commie Hollywood liberals. (So he just never wants to work again, is that it?)

This has been a long time in coming, ladies and gentlemen, and now finally, finally, we can rest easy.

A software engineer and a next-generation iPhone walk into a bar

Mum and daughter are banned from Euro Disney because they were dressed as princesses. Man, the French take their revolution seriously…

New $100 bills will have hidden images running vertically. Will depict dogs playing poker, sad clowns, and Elvis on velvet.

Those hysterical Hitler-parody rants on YouTube? History.

A drunken sailor takes offense. (H/T Midwest Conservative Journal)

I want one of these, but only if it comes with Surround Sound.

One of the guys who voice the Geico ads has been fired for bad-mouthing Tea Partiers. Forget car insurance, thank goodness for unemployment insurance.

When will the hate finally stop?

Finally, for those who hate the Yankees, witness their first triple play in 350 years. Yes, not since Ezekiel Fear-the-Lord threw to Samuel Temperance Search-the-Scriptures, who tossed it to Elijah Miserable Reprobate has New York seen such a thing…

I know that Iran is close to getting a bomb, and the national debt now exceeds the number of calories in a KFC Double Down, and earthquakes are killing thousands of people worldwide, but this is serious.

Speaking of earthquakes, according to one expert, naughtiness causes them. Whether he’s an expert on naughtiness or seismic activity is unclear.

Blago wants the court to subpoena the president of the United States as a witness in his corruption trial. Just picture that scene… There are also all kinds of alleged allegations allegedly alleged against the alleged pres — the president.

If you’re looking to raise the I.Q. of your kiddies, Mensa’s here to help. Years ago I devised one of my own brainiac games. It was called Cromwell and was like chess, only the king, the queen, and the bishops were all dead. Two new pieces were added: this guy Phil and his young son Leonard, who played the lute. Tournaments could last years, as no one was sure of the object, given that pieces could not only move in any direction for any number of spaces but also across boards, even games, so that a knight could wind up owning Park Place. Needless to say, it failed to catch on, but it did catch fire, which landed me in court more than once. Then I turned 12.

Who needs nukes when you can have one of these thingees: “the Prompt Global Strike warhead would be mounted on a long-range missile to start its journey toward a target. It would travel through the atmosphere at several times the speed of sound, generating so much heat that it would have to be shielded with special materials to avoid melting.” Wow. That’s almost as fast as it took Benjamin Netanyahu to say feh to Obama’s mini-nukes summit…

Those animation farceurs Trey Parker and Matt Stone have had their lives threatened by an Islamic website, which is “annoyed” that Mohammad was depicted — in a bear costume. Never mind that Siddhartha Gautama has been shown snorting lines of coke, or that Jesus, whom Christians believe to be a divine person and not merely a prophet or a supremely enlightened avatar, is regularly reduced to, well, a cartoon. Given what was done to Dutch filmmaker Theo Van Gogh, the threat is no joke.

But wait: turns out Comedy Central censored the episode and saved their lives! — if not their artistic integrity. (All right, all right, but these things are relative, you know…)

Chachi has a Twitter account. And he definitely does not love Joanie, if Joanie is another one of those bleeding-heart commie Hollywood liberals. (So he just never wants to work again, is that it?)

This has been a long time in coming, ladies and gentlemen, and now finally, finally, we can rest easy.

A software engineer and a next-generation iPhone walk into a bar

Mum and daughter are banned from Euro Disney because they were dressed as princesses. Man, the French take their revolution seriously…

New $100 bills will have hidden images running vertically. Will depict dogs playing poker, sad clowns, and Elvis on velvet.

Those hysterical Hitler-parody rants on YouTube? History.

A drunken sailor takes offense. (H/T Midwest Conservative Journal)

I want one of these, but only if it comes with Surround Sound.

One of the guys who voice the Geico ads has been fired for bad-mouthing Tea Partiers. Forget car insurance, thank goodness for unemployment insurance.

When will the hate finally stop?

Finally, for those who hate the Yankees, witness their first triple play in 350 years. Yes, not since Ezekiel Fear-the-Lord threw to Samuel Temperance Search-the-Scriptures, who tossed it to Elijah Miserable Reprobate has New York seen such a thing…

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Unemployment Insurance II

Liberals argue that extending unemployment insurance (now to 99 weeks) is necessary to prevent real hardship among American working families affected by the recession. They accuse conservatives of being heartless brutes, ready as always to step over the starving in the streets.

Conservatives argue that providing generous unemployment benefits indefinitely is a huge disincentive to going out and finding a job. They accuse liberals of trying to create a permanently dependent class by using the “bread and circuses” policy that eventually undid the Roman Empire.

To an extent they are both right. When a family’s main breadwinner is suddenly thrown out of work, that family can suffer real hardship unless it has substantial economic resources to fall back on. But if unemployment insurance is too generous, then workers become too picky about what new job they are willing to accept. After all, unemployment benefits and some off-the-books work on the side can add up to nearly what some families at the lower end of the socio-economic spectrum were earning before the breadwinner lost his or her job.

So how about this as a way to help the unemployed while not disincentivizing them from actively looking for work: have the unemployment benefits decline — say 5 percent a week — until they disappear after 20 weeks. If there is a severe recession causing rising unemployment, the benefits could be renewed for another 20-week cycle.  This would keep food on the table but also give the beneficiaries a strong incentive to search for a job sooner rather than later and perhaps take one that is less than ideal.

Just a thought.

Liberals argue that extending unemployment insurance (now to 99 weeks) is necessary to prevent real hardship among American working families affected by the recession. They accuse conservatives of being heartless brutes, ready as always to step over the starving in the streets.

Conservatives argue that providing generous unemployment benefits indefinitely is a huge disincentive to going out and finding a job. They accuse liberals of trying to create a permanently dependent class by using the “bread and circuses” policy that eventually undid the Roman Empire.

To an extent they are both right. When a family’s main breadwinner is suddenly thrown out of work, that family can suffer real hardship unless it has substantial economic resources to fall back on. But if unemployment insurance is too generous, then workers become too picky about what new job they are willing to accept. After all, unemployment benefits and some off-the-books work on the side can add up to nearly what some families at the lower end of the socio-economic spectrum were earning before the breadwinner lost his or her job.

So how about this as a way to help the unemployed while not disincentivizing them from actively looking for work: have the unemployment benefits decline — say 5 percent a week — until they disappear after 20 weeks. If there is a severe recession causing rising unemployment, the benefits could be renewed for another 20-week cycle.  This would keep food on the table but also give the beneficiaries a strong incentive to search for a job sooner rather than later and perhaps take one that is less than ideal.

Just a thought.

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Unemployment Insurance I

If an astronomer were to casually claim that Ptolemy was right and the sun revolves around the earth, or if a paleontologist were to suddenly subscribe to Archbishop Ussher’s idea that the world was created as we know it now in the night preceding October 23, 4004 BCE, they would be laughed out of their disciplines. The evidence for the modern understanding of such matters is, after all, overwhelming. So to make such a claim would require massive and unequivocal data to back it up.

However, if an economist does the equivalent, the entire profession, instead of collapsing in laughter, says, ” . . . . oh, look! A squirrel!” Economists, it seems, suffer no loss of respect by their peers if they utter ex cathedra pronouncements that are in flat contradiction of the most basic tenets of the discipline. All they have to do is to be advancing a political agenda at the time, and all — no matter how ridiculous — is forgiven.

When Senator John Kyl said that “continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Paul Krugman wrote in his New York Times column “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.”

Really? Here’s what Paul Krugman wrote in his own textbook, Macroeconomics:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. … In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

As James Taranto pointed out, “It seems Krugman himself lives in two different universes — the universe of the academic economist and the universe of the bitter partisan columnist.”

When the Wall Street Journal noted last week that extending unemployment benefits tends to keep unemployment high by reducing the incentive to look for work — and quoted Lawrence Summers, writing in 1999, to that effect — they received a furious letter from Mr. Summers, now head of Obama’s National Economic Council. The Wall Street Journal had a field day in response, pointing out that,

The Summers argument is that increasing unemployment insurance increases aggregate demand and thus reduces unemployment. This is because he and the neo-Keynesians believe that the impact on macroeconomic demand of this jobless spending outweighs the microeconomic harm on individual incentives. In other words, if government pays people for not working, then more people will work. Subsidize unemployment and you will somehow get less of it.

Summers’s idea is the economic equivalent of a perpetual motion machine.

If economists want to get the same respect that people give to real scientists, they are going to have start behaving like real scientists. They have to denounce nonsense from a fellow economist when they hear it, even if that economist is wearing a political hat rather than an academic one.

If an astronomer were to casually claim that Ptolemy was right and the sun revolves around the earth, or if a paleontologist were to suddenly subscribe to Archbishop Ussher’s idea that the world was created as we know it now in the night preceding October 23, 4004 BCE, they would be laughed out of their disciplines. The evidence for the modern understanding of such matters is, after all, overwhelming. So to make such a claim would require massive and unequivocal data to back it up.

However, if an economist does the equivalent, the entire profession, instead of collapsing in laughter, says, ” . . . . oh, look! A squirrel!” Economists, it seems, suffer no loss of respect by their peers if they utter ex cathedra pronouncements that are in flat contradiction of the most basic tenets of the discipline. All they have to do is to be advancing a political agenda at the time, and all — no matter how ridiculous — is forgiven.

When Senator John Kyl said that “continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Paul Krugman wrote in his New York Times column “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.”

Really? Here’s what Paul Krugman wrote in his own textbook, Macroeconomics:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. … In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

As James Taranto pointed out, “It seems Krugman himself lives in two different universes — the universe of the academic economist and the universe of the bitter partisan columnist.”

When the Wall Street Journal noted last week that extending unemployment benefits tends to keep unemployment high by reducing the incentive to look for work — and quoted Lawrence Summers, writing in 1999, to that effect — they received a furious letter from Mr. Summers, now head of Obama’s National Economic Council. The Wall Street Journal had a field day in response, pointing out that,

The Summers argument is that increasing unemployment insurance increases aggregate demand and thus reduces unemployment. This is because he and the neo-Keynesians believe that the impact on macroeconomic demand of this jobless spending outweighs the microeconomic harm on individual incentives. In other words, if government pays people for not working, then more people will work. Subsidize unemployment and you will somehow get less of it.

Summers’s idea is the economic equivalent of a perpetual motion machine.

If economists want to get the same respect that people give to real scientists, they are going to have start behaving like real scientists. They have to denounce nonsense from a fellow economist when they hear it, even if that economist is wearing a political hat rather than an academic one.

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Who Will Write the History of the Battle Over ObamaCare?

President Obama characterized yesterday’s vote on the health-care bill as the nation answering “the call of history.” This turn of phrase is an accurate depiction of how he and his liberal supporters view both the issue and modern American history. From this frame of reference, health care is just the latest — and by no means last — step toward greater social justice in which the state assumes greater and greater responsibility for the lives of every American. Like unemployment insurance, social security, and Medicare, this bill’s purported goal of providing affordable health insurance to every American is seen by Obama and his backers as not only just but also inevitable, much the same way they think of the “New Deal” legislation passed by Franklin Roosevelt or Lyndon Johnson’s “Great Society.” They are convinced that, like those laws, ObamaCare will soon be seen not as a massive expansion of government power but as yet another chapter in America’s inexorable journey to social justice that will transform this law into a sacrosanct element of our political life.

Thus, going forward to the November midterm elections and beyond, the real question is not whether the bill will actually achieve universal health insurance without lowering the quality of care or raising costs; that is an impossibility. Rather, the question will be whether liberals in Congress and especially the media will be able to imprint the idea into the majority of American minds that, however messy its passage was and problematic the details may be, ObamaCare had to be passed and cannot be reversed.

The challenge for conservatives is more than merely pointing out ObamaCare’s shortcomings, its enormous costs, and its impact on a huge American industry. The challenge is also more than demonstrating how the health care that ordinary Americans get — and which the vast majority currently think is good — will decline. Conservatives’ real job is to attack the liberal narrative. What they must point out is that, rather than the next inevitable step toward greater justice, Obama’s “reform” is, in fact, a move away from individual freedom and toward the same nanny welfare state that Americans thought they had put to rest. Rather than a progressive innovation, ObamaCare is a retrograde move that seeks to drag American politics and the economy back to the mistaken emphasis on government power of the mid-20th century. Like so much of the welfare economics and failed liberal policies of that era, ObamaCare has the potential to do far more harm than good. Policies that are driven merely by good intentions and a belief in expanding government power can help derail the engine of American wealth creation and freedom — just as the devastating mistakes of “Great Society” liberalism did in the past.

It is an axiom that the victors write the history of battles and wars. If those who rightly see ObamaCare as a potential disaster want to win, they must not accept the liberal frame of reference about this issue or history. They must recast the both the debate just concluded and the one about to begin. It’s about freedom, not the liberal myth of government-imposed social justice.

President Obama characterized yesterday’s vote on the health-care bill as the nation answering “the call of history.” This turn of phrase is an accurate depiction of how he and his liberal supporters view both the issue and modern American history. From this frame of reference, health care is just the latest — and by no means last — step toward greater social justice in which the state assumes greater and greater responsibility for the lives of every American. Like unemployment insurance, social security, and Medicare, this bill’s purported goal of providing affordable health insurance to every American is seen by Obama and his backers as not only just but also inevitable, much the same way they think of the “New Deal” legislation passed by Franklin Roosevelt or Lyndon Johnson’s “Great Society.” They are convinced that, like those laws, ObamaCare will soon be seen not as a massive expansion of government power but as yet another chapter in America’s inexorable journey to social justice that will transform this law into a sacrosanct element of our political life.

Thus, going forward to the November midterm elections and beyond, the real question is not whether the bill will actually achieve universal health insurance without lowering the quality of care or raising costs; that is an impossibility. Rather, the question will be whether liberals in Congress and especially the media will be able to imprint the idea into the majority of American minds that, however messy its passage was and problematic the details may be, ObamaCare had to be passed and cannot be reversed.

The challenge for conservatives is more than merely pointing out ObamaCare’s shortcomings, its enormous costs, and its impact on a huge American industry. The challenge is also more than demonstrating how the health care that ordinary Americans get — and which the vast majority currently think is good — will decline. Conservatives’ real job is to attack the liberal narrative. What they must point out is that, rather than the next inevitable step toward greater justice, Obama’s “reform” is, in fact, a move away from individual freedom and toward the same nanny welfare state that Americans thought they had put to rest. Rather than a progressive innovation, ObamaCare is a retrograde move that seeks to drag American politics and the economy back to the mistaken emphasis on government power of the mid-20th century. Like so much of the welfare economics and failed liberal policies of that era, ObamaCare has the potential to do far more harm than good. Policies that are driven merely by good intentions and a belief in expanding government power can help derail the engine of American wealth creation and freedom — just as the devastating mistakes of “Great Society” liberalism did in the past.

It is an axiom that the victors write the history of battles and wars. If those who rightly see ObamaCare as a potential disaster want to win, they must not accept the liberal frame of reference about this issue or history. They must recast the both the debate just concluded and the one about to begin. It’s about freedom, not the liberal myth of government-imposed social justice.

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Running Against Obama

The Wall Street Journal‘s editors see a lesson in the contrasting approaches of two governors — Charlie Crist and Rick Perry:

The different political fortunes have a lot to do with their relative distance from Washington policies. While Mr. Perry has loudly condemned ObamaCare, Mr. Crist has waffled. Mr. Crist embraced not only the President’s “stimulus” bill but the President himself during a now-infamous moment. Mr. Perry refused stimulus dollars for unemployment insurance and education because the funds would simply have increased the demand for state money once the federal aid runs out.

Mr. Crist approved a $2.2 billion tax increase for the fiscal 2010 budget, even though he had promised that “stimulus” money would obviate the need for tax increases. Regardless of Washington’s plans to distribute taxpayer money, Mr. Perry has shown a willingness to cut spending, and during his tenure enacted tax relief for businesses and property owners.

The key in all this, as the editors implicitly acknowledge, is the out-of-step policies of the Obami and the Congress. If not for the spending binge, the fixation on job-killing, and hugely unpopular measures like ObamaCare, Perry would not have a target and Crist would not have been ensnared. The Democrats and their media enablers have obsessively railed at the “party of no.” Putting aside the fact that the allegation is false (Obama’s health-care summit proved this), it ignores the obvious: voters want their representatives to say no. Perry was rewarded for being a stalwart opponent of Obamaism — as were Chris Christie, Bob McDonnell, and Scott Brown. There isn’t a winning coalition out there for “More ObamaCare!” or “Give Obama all the help he needs!”

And that is a problem for congressional Democrats, who will face a nationalized election, the sole issue being — stop Obama or more of the same. Right now, that’s an untenable position for Democrats, nearly all of whom have assisted in passing one or more parts of the agenda that has riled up the electorate. They can try to put some distance between themselves and the Obama agenda, but it’s getting late in the game, and the voters are awfully mad. If you doubt it, take a look at Charlie Crist’s poll numbers.

The Wall Street Journal‘s editors see a lesson in the contrasting approaches of two governors — Charlie Crist and Rick Perry:

The different political fortunes have a lot to do with their relative distance from Washington policies. While Mr. Perry has loudly condemned ObamaCare, Mr. Crist has waffled. Mr. Crist embraced not only the President’s “stimulus” bill but the President himself during a now-infamous moment. Mr. Perry refused stimulus dollars for unemployment insurance and education because the funds would simply have increased the demand for state money once the federal aid runs out.

Mr. Crist approved a $2.2 billion tax increase for the fiscal 2010 budget, even though he had promised that “stimulus” money would obviate the need for tax increases. Regardless of Washington’s plans to distribute taxpayer money, Mr. Perry has shown a willingness to cut spending, and during his tenure enacted tax relief for businesses and property owners.

The key in all this, as the editors implicitly acknowledge, is the out-of-step policies of the Obami and the Congress. If not for the spending binge, the fixation on job-killing, and hugely unpopular measures like ObamaCare, Perry would not have a target and Crist would not have been ensnared. The Democrats and their media enablers have obsessively railed at the “party of no.” Putting aside the fact that the allegation is false (Obama’s health-care summit proved this), it ignores the obvious: voters want their representatives to say no. Perry was rewarded for being a stalwart opponent of Obamaism — as were Chris Christie, Bob McDonnell, and Scott Brown. There isn’t a winning coalition out there for “More ObamaCare!” or “Give Obama all the help he needs!”

And that is a problem for congressional Democrats, who will face a nationalized election, the sole issue being — stop Obama or more of the same. Right now, that’s an untenable position for Democrats, nearly all of whom have assisted in passing one or more parts of the agenda that has riled up the electorate. They can try to put some distance between themselves and the Obama agenda, but it’s getting late in the game, and the voters are awfully mad. If you doubt it, take a look at Charlie Crist’s poll numbers.

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Flotsam and Jetsam

Uh oh: Eliot Spitzer is back in the political ring, “acting as an unofficial adviser to New York’s current governor, the hapless David Paterson, whose campaign for re-election is basically in the toilet.” But not to worry, he’s going through an intermediary, an arrangement with which the shameless Spitzer “has had rather a lot of experience.”

Uh oh: Cliff May reviews the troubling trends in Iraq and efforts by Iran to ban candidates and manipulate the Iraqi elections. “It would be a cruel irony — not to mention a terrible defeat — if the sacrifices Americans have made were, in the end, to produce an Iraq dominated by Iranian Supreme Leader Ali Khamenei and President Mahmoud Ahmadinijad [sic], enemies of Iraq, freedom, and democracy — enemies sworn to bringing about a ‘world without America.’ Why don’t Biden and Obama recognize that? And why are their critics not more vocal about the fact that they do not?”

Uh oh: ” Both the number of workers filing new applications for unemployment insurance and producer prices unexpectedly surged, dealing a setback to hopes the economy was showing a strong recovery.Initial claims for state unemployment benefits increased 31,000 to a seasonally adjusted 473,000 in the week ended Feb. 13, up from an upwardly revised 442,000 the prior week, the Labor Department said.”

Uh oh: “The Treasury Department said Wednesday that the deficit for January totaled $42.63 billion. That left the total of red ink so far this budget year at $430.69 billion, 8.8 percent higher than last year when the deficit soared to an unprecedented level of $1.42 trillion. Obama, in sending Congress a new budget plan on Feb. 1, projected that this year’s deficit would hit $1.56 trillion and would remain above $1 trillion for three consecutive years. He forecast the 2011 deficit, for the budget year that begins next Oct. 1, would total $1.27 trillion.”

Uh oh (for the Obami): A new low — only 24 percent of voters think health care is the most likely achievement for Obama.

Uh oh: Evan Bayh is going to lose his halo in the mainstream media. “Sen. Evan Bayh is throwing a wrench in the works of a signature administration initiative, expressing reservations about the plan for the government to eliminate private-sector middlemen and make student loans directly.” Translation: he’s against a government takeover of student loans.

Uh oh: Michael Bennet’s embrace of the public option and reconciliation isn’t playing well back home in Colorado: “Most Americans want Congress to start over on health care reform, but it seems Colorado Sen. Michael Bennet would rather jam it down our throats. Ignoring the message that voters sent in Massachusetts, and shedding any notion that he intends to be a moderate Democrat, Bennet is leading a pack of liberal senators who want to push through health-care reform using a process known as reconciliation. How is it possible that Sen. Bennet, yet to receive one vote from a Coloradan, has such a tin ear for what most Coloradans and Americans want?” Colorado is already rated a “toss-up” (subscription required), but recent polling had Bennet down by double digits.

Uh oh (for the Left): Politico runs a forum entitled “Liberals( progressives) are they finished?” Hard to say any major political movement is ever “finished,” but it isn’t a healthy sign when you have to ask.

Uh oh: Eliot Spitzer is back in the political ring, “acting as an unofficial adviser to New York’s current governor, the hapless David Paterson, whose campaign for re-election is basically in the toilet.” But not to worry, he’s going through an intermediary, an arrangement with which the shameless Spitzer “has had rather a lot of experience.”

Uh oh: Cliff May reviews the troubling trends in Iraq and efforts by Iran to ban candidates and manipulate the Iraqi elections. “It would be a cruel irony — not to mention a terrible defeat — if the sacrifices Americans have made were, in the end, to produce an Iraq dominated by Iranian Supreme Leader Ali Khamenei and President Mahmoud Ahmadinijad [sic], enemies of Iraq, freedom, and democracy — enemies sworn to bringing about a ‘world without America.’ Why don’t Biden and Obama recognize that? And why are their critics not more vocal about the fact that they do not?”

Uh oh: ” Both the number of workers filing new applications for unemployment insurance and producer prices unexpectedly surged, dealing a setback to hopes the economy was showing a strong recovery.Initial claims for state unemployment benefits increased 31,000 to a seasonally adjusted 473,000 in the week ended Feb. 13, up from an upwardly revised 442,000 the prior week, the Labor Department said.”

Uh oh: “The Treasury Department said Wednesday that the deficit for January totaled $42.63 billion. That left the total of red ink so far this budget year at $430.69 billion, 8.8 percent higher than last year when the deficit soared to an unprecedented level of $1.42 trillion. Obama, in sending Congress a new budget plan on Feb. 1, projected that this year’s deficit would hit $1.56 trillion and would remain above $1 trillion for three consecutive years. He forecast the 2011 deficit, for the budget year that begins next Oct. 1, would total $1.27 trillion.”

Uh oh (for the Obami): A new low — only 24 percent of voters think health care is the most likely achievement for Obama.

Uh oh: Evan Bayh is going to lose his halo in the mainstream media. “Sen. Evan Bayh is throwing a wrench in the works of a signature administration initiative, expressing reservations about the plan for the government to eliminate private-sector middlemen and make student loans directly.” Translation: he’s against a government takeover of student loans.

Uh oh: Michael Bennet’s embrace of the public option and reconciliation isn’t playing well back home in Colorado: “Most Americans want Congress to start over on health care reform, but it seems Colorado Sen. Michael Bennet would rather jam it down our throats. Ignoring the message that voters sent in Massachusetts, and shedding any notion that he intends to be a moderate Democrat, Bennet is leading a pack of liberal senators who want to push through health-care reform using a process known as reconciliation. How is it possible that Sen. Bennet, yet to receive one vote from a Coloradan, has such a tin ear for what most Coloradans and Americans want?” Colorado is already rated a “toss-up” (subscription required), but recent polling had Bennet down by double digits.

Uh oh (for the Left): Politico runs a forum entitled “Liberals( progressives) are they finished?” Hard to say any major political movement is ever “finished,” but it isn’t a healthy sign when you have to ask.

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McCain on The Economy

John McCain today provided the outlines of his proposed short-term fix for the housing crisis, along with hints about his plans for long-term economic growth.

The tightrope he must walk is this: provide concrete solutions without joining the stampede toward government intervention. And his proposals to reform unemployment insurance and job retraining must aim to calm fears without adopting traditional Democratic nostrums (e.g. extending the period of eligibility to collect unemployment benefits).

McCain, in essence, has put his toe in the pool of domestic policy salesmanship. A single speech, of course, will not be sufficient. He and his campaign must now embark on a full-scale effort to explain his views on domestic policy, differentiate himself from the Democrats, educate voters about his policy vision, and much more. That is the battlefield where he and his Democratic opponent will fight for the much-coveted independents.

It is a key step in moving from McCain’s comfort zone (foreign policy) to those issues which resonate most with voters. And next time, he would do better to have his policies fleshed out from the start.

John McCain today provided the outlines of his proposed short-term fix for the housing crisis, along with hints about his plans for long-term economic growth.

The tightrope he must walk is this: provide concrete solutions without joining the stampede toward government intervention. And his proposals to reform unemployment insurance and job retraining must aim to calm fears without adopting traditional Democratic nostrums (e.g. extending the period of eligibility to collect unemployment benefits).

McCain, in essence, has put his toe in the pool of domestic policy salesmanship. A single speech, of course, will not be sufficient. He and his campaign must now embark on a full-scale effort to explain his views on domestic policy, differentiate himself from the Democrats, educate voters about his policy vision, and much more. That is the battlefield where he and his Democratic opponent will fight for the much-coveted independents.

It is a key step in moving from McCain’s comfort zone (foreign policy) to those issues which resonate most with voters. And next time, he would do better to have his policies fleshed out from the start.

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