I’m so excited, I can’t stand it! So excellent to hear the White House agreeing with Congressional Republicans to extend tax cuts for 2 years through 2012! As a concession, the Republicans agree to extend unemployment insurance for another 13 months. That’s not quite the “Shock & Awe Yeah” proposal I have of 260 weeks of unemployment benefits, but 155 weeks is still pretty damn good!
Deploying an enormous unemployment insurance safety net could very well jump start the economy or bring us back to socialism. I take the former stance, as a bullet-proof safety net causes employees to work harder, take more risks, and be more creative since they no longer have to fear losing their jobs.
Getting 13 months of extra unemployment benefits after getting 99 weeks sounds like a lot. That said, if you were unemployed, hell yeah you’d want to the extra 13 months! Now that compromise is here between our nefarious, I mean selfless leaders in Washington, the next step is dealing with all this QE2, QE3, QE4 nonsense! There are much better ways to spend $600 billion than buying back US treasuries to stimulate the economy.
THE NEXT STEP
Instead of spending billions more on quantitative easing, spend billions directly on unemployment instead. You address the problem straight on and help stimulate the economy as well. If you cut taxes for “the rich”, they are likely to just save their increased disposable income. But, if you give $300 a week to someone who is unemployed and basically doing everything they can to survive, you can bet your bottom dollar they will spend the majority of the $300 on food, clothing, and shelter! The issue is whether or not those who are collecting are “doing everything they can to survive.” Not all, but most are.
Many argue that 99-155 weeks is already a long enough time to be collecting unemployment benefits. My question to those who criticize is whether they’ve ever been in the same situation before? If not, then perhaps best not to judge. Take my millionaire friend Greg, for example. He’s been collecting unemployment checks for over 70 weeks now as it’s pretty tough finding a comparable job making $200,000 a year. Yes, he can probably work at McDonald’s for $25,000 a year, but is that rational with his experience and savings? No.
Greg went to Cabos, Mexico to vacation for three weeks in November because companies weren’t hiring. Can you blame him? Now that it’s December, things are as dead as a door knob and he’s thinking about going to Hawaii until the new year. It’s just as easy for Greg to hunt for jobs online in sunshine, than during the cold and rainy weather of the mainland. That’s rational thinking to me.
SPEND MONEY ON UNEMPLOYMENT NOT HOCUS POCUS ECONOMICS
If the most important issue at hand is unemployment, then the Fed should spend money directly on alleviating unemployment! It’s inefficient to try and stimulate the economy via treasury buying to try and lower rates to then hope consumers borrow and spend. You’ve got to then hope higher spending leads to higher corporate earnings, which leads to expansion and increased hiring. Talk about taking the scenic route!
Providing liquidity and low interest rates is definitely a must to generate investment spending, however it’s unnecessary to spend the entire $600 billion or whatever the QE amount is just on treasury buying. The 10-year yield is now back up to 3% after QE2, which means the initiative has completely backfired since the 10-yr yield was at 2.4% before the $600 billion deployment! Spend money directly on the unemployed and you will not only help those who need help the most, you’ll see a large majority of that money get spent immediately back into the economy!
Readers, what do you think about the initiative of directing money straight to the unemployed rather than trying to manipulate assets and interest rates? Where is my logic flawed?
PS Who cares about the growing budget deficit when we got a 3 year unemployment insurance net and tax cut extensions for all to look forward to in 2011 and beyond!