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Looking Beyond The Latest (And Last) Fiscal Stimulus For The Unemployed

Tyler Durden's picture




 

Those collecting unemployment checks can rest easy - the Senate has just extended unemployment benefits through November 30 in another attempt to round up a few straggling votes for the mid-term elections. The fact that instead of creating jobs, the administration is still stuck with perpetuating the sugar high that achieves nothing but merely adds tens of billions more to the US debt, is just as appalling as the fact that this little sham is supposed to incite populist support for the president. Yet even as Europe is just starting out on its farstatic voyage, ours is slowly coming to its end: this latest fiscal stimulus could well be the last one. Here are the thought's of Goldman's Alec Phillips on just how great of an economic deterioration and slow down we should expect as a result of the eventual elimination of various fiscal stimuli.

The End of the Road for Fiscal Stimulus?

Today the Senate moved forward on a renewal of extended unemployment benefits through November 30. The good news is that this will avoid further income disruption for those who had expected to receive benefits, thereby reducing any additional drag on growth from fiscal policy in 2H2010. The bad news is that this latest extension of fiscal stimulus may be the last. Congress looks increasingly unlikely to extend ay more fiscal aid to state governments, despite ongoing shortfalls in state revenues, and they have already let several other items lapse.

We are therefore removing from our estimates an assumption of further fiscal stimulus beyond the policies in law (including this week’s unemployment extension), though we continue to expect extension of most of the expiring 2001/2003 tax cuts. This adds almost a full percentage point to the drag on growth from Q4 2010 to Q4 2011 to what we had already estimated.

The Senate today moved forward with a renewal of extended unemployment benefits through November 30. Enactment is likely by the end of this week. The result will be a resumption of benefits by next week for roughly 2.9 million workers whose eligibility lapsed since early June.

However, this latest renewal, which omitted some related policies (see below) and did not extend any of the other expired or soon-to-expire provisions enacted in the American Recovery and Reinvestment Act (ARRA), signals that the likelihood for extension of these other items has declined.  We have noted this possibility in the past (see most recently, “Stimulus Extension Becoming More Difficult,” US Daily, June 29), but with another congressional recess approaching and little legislative discussion of additional extensions, the likelihood has declined enough that we are formally revising our assumptions.  Most recently, this consisted of four sets of items:  

1. Unemployment insurance. Our estimates have assumed renewal through 2011 of the extended eligibility period (up to 99 weeks) for unemployment benefits, based mainly on our view that the unemployment rate would remain elevated. When Congress finally let extended benefits expire in previous cycles, the unemployment rate had peaked an average of 23 months prior, and had dropped by an average of 1.7 points. After this latest round expires November 30, extended benefits will have been in place for 28 months, or roughly the average period in previous recessions, though the unemployment rate will undoubtedly be higher than at any previous point at which extended benefits expired in the past (the highest rate previously was 7.4%).  It should also be noted that although Congress renewed the extended benefit period, it did not renew the tax deductibility of benefits or the extra $25/week payment, both of which were enacted in ARRA. So even with its renewal, the policy is becoming somewhat less generous.

2.  State fiscal aid. State governments have received just under two-thirds of the $145 billion Congress allocated for fiscal aid to state governments in ARRA.  There are two proposals on the table to provide additional fiscal aid to states: (1) renewing enhanced Medicaid payments to states for two additional quarters, through Q2 2011, at a cost of $25bn; and (2) adding another $10bn in spending to the “State Fiscal Stabilization Fund.”  We had assumed the former but not the latter would be enacted, but we are now removing this from our estimates.  More than half of the states have assumed in their own budgets that Congress will provide these additional funds; they will need to further cut spending or raise taxes unless Congress acts in the next month or two.

3. Other spending.  We had assumed a few other smaller items in our fiscal assumptions, mainly to reflect pending congressional proposals: the extension of subsidies for COBRA health premiums for the recently unemployed and roughly $10bn in additional infrastructure spending.  We are removing these from our estimates as well.

4. The “Making Work Pay” credit and other tax measures.  We are not changing our assumptions in this area.  We continue to expect Congress to extend the $60bn/year “Making Work Pay” credit meant to offset the payroll tax on the first $8,000 of earnings that was enacted as part of ARRA. We also continue to expect Congress to extend most of the 2001/2003 tax cuts, which under current law are scheduled to expire at the end of 2010.  Specifically, we believe Congress will extend tax rates and credits for households with incomes under $250,000, as the administration has proposed and as permitted under the pay-as-you-go rules Congress enacted earlier this year. However, we continue to believe that Congress will be hesitant to incur any cost in dealing with the expiring capital gains and dividend rates (these go from 15% to 20% and the ordinary income tax rate, respectively).  This could play out a number of different ways but the effect on growth should be similar (for more, see “Capital Gains and Dividend Taxes: Rising, But When and How?” US Daily, May 6). 

Compared with our previous estimates based on the assumptions noted above, removing the assumed extension of stimulus increases our estimate of the fiscal drag on growth by an average of just under one percentage point from Q4 2010 through Q4 2011, as shown in the chart below.

Estimated Effect of Selected Fiscal Policies on Growth 2009-2011

The debate over fiscal policy has swung back and forth a few times over the last year; at various points our assumptions looked too generous, at other times too austere.   Recently, the dominant risk to our estimates had been that Congress would follow a more austere policy than we had estimated.  Our revised estimates attempt to balance the risks as we see them, but may now lean to the austere side, since we assume no further extension of stimulus, and Congress might still be able to enact at least one of the items noted above. The following factors will be most important in determining whether the outlook for fiscal policy will deviate from our

above assumptions over the next year:

1. Growth in the second half. Our forecast calls for annualized sequential growth of just 1.5%  in the second half of this year, in large part due to the fading effects of fiscal stimulus and the inventory cycle. To the extent that our forecast plays out, there may well be a renewed effort to provide support through fiscal policy, though despite increased growth concerns over the last few weeks, there is no indication of additional policies coming out of Washington, nor is it clear that Congress could manage to enact new measures if such proposals did emerge.

2. Congressional appetite to delay offsets to near-term stimulus.  Resistance to additional stimulus measures has grown along with public concern over the budget deficit. A possible solution is to legislate additional stimulus now with offsetting savings a few years hence. This is easiest done with savings through mandatory spending cuts or tax increases, though some lawmakers have proposed offsetting the cost of state fiscal aid with a rescission of stimulus funds not expected to be spent until 2012.  If such middle ground is eventually found, fiscal policy could result in slightly less of a drag on growth in 2011 than we expect, with more of a drag in subsequent years.

3. The midterm election. While the outcome of this November’s midterm congressional election is still uncertain, it will clearly play a role in fiscal decisions late this year and next year. If there is to be a further extension of unemployment benefits beyond what the Senate voted on today, it is likely to occur in a “lame duck” session of Congress in November or December, at which point the election results will be known. The debate on extending some of the 2001/2003 tax cuts also seems unlikely to conclude before the election. Since most polls—and historical precedent—imply Republican gains in November and thus a Congress more closely divided than it is today, further stimulus measures are likely to face even greater resistance in Congress than they have over the last few months.  

4. Legislative gridlock.   The one area in which our assumptions rely on congressional action is tax policy. If Congress is unable to reach an agreement on the expiring tax provisions before the end of the year, rates will increase across the board on January 1, 2011, increasing the tax burden by an equivalent of 1.4% of GDP beyond what is now shown in the exhibit.  There is general bipartisan agreement on about 75% of these provisions (measured by revenue), so the risk is mainly that gridlock results in a temporary hiccup in early 2011 that Congress takes a few months to correct. Still, this is likely to become an increasing concern as we approach the end of the year.

 

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Tue, 07/20/2010 - 23:23 | 480239 Muir
Muir's picture

" this latest fiscal stimulus could well be the last one"

 

Sybil, make up your mind!

Wed, 07/21/2010 - 03:51 | 480453 Moneygrove
Moneygrove's picture

still waiting for the jobs from the bush tax cuts !

Wed, 07/21/2010 - 08:32 | 480560 E pluribus unum
E pluribus unum's picture

They went to China

Tue, 07/20/2010 - 23:26 | 480244 J.Caesar
J.Caesar's picture

We pay asia to make stuff, they pay us to not work.  Different!!

Wed, 07/21/2010 - 01:35 | 480373 cossack55
cossack55's picture

My favorite sentiment from the Soviet era:

"They pretend to pay us and we pretend to work"

Coming to a former capitalist republic near you or already here?

Wed, 07/21/2010 - 09:03 | 480604 gmrpeabody
gmrpeabody's picture

+100

Tue, 07/20/2010 - 23:59 | 480268 Robert J Moran
Robert J Moran's picture

Is this then the cue to these people to bank every last penny of their 'unemployment payments' and at the same time to not make a single mortgage payment?!  The long, slow, grinding, downward slide in the American standard of living has begun in earnest... A few more 'payments to not work' or missed mortgage remittances at this juncture won't make a wit of difference.  Like peeing out in a rainstorm...

Wed, 07/21/2010 - 11:32 | 480859 tenaciousj
tenaciousj's picture

From all the sob stories you see, apparently no one is banking shit.  Every last penny is still spent.  At this point it's being spun as that the benefits must be extended until every single one of the 8 million or so (i just guessed that number, since that seems what the gov does too) unemployed have a job.

I predict that unless something major changes to alter this you will see people still on EUC for 5 years or more.   Which at the 99+ week mark it's just welfare, you just don't call it that to make people feel better.

Wed, 07/21/2010 - 00:01 | 480269 RoRoTrader
RoRoTrader's picture

my world is empty without you babe

my world is empty without you babe

and as i go my way alone

i find it hard for me to to carry on

i need your strength, your tender touch

i need the love i miss so much

my world is empty without you, babe

from this old world

i try to hide my face

but from this loneliness

there is no hiding place

inside this cold and empty houese i dwell

in darkness with memories i know so well

i need love now more than before

i can hardly carry on any more

my world is empty without you, babe

my mind and soul have felt like this

since love between us no more exists

and each time darkness falls

it finds me alone

with these 4 walls

my world is empty without you, babe

without you, babe

without you, babe

Wed, 07/21/2010 - 00:07 | 480278 RoRoTrader
RoRoTrader's picture

the words are obviously not my genius.......i wish.......American genius, human genius

Wed, 07/21/2010 - 00:06 | 480277 tmosley
tmosley's picture

Yeah, sort of like how your deadbeat relatives will be moving out next week.

This situation isn't going to end itself.  At best, they will withdraw stimulus for a short while, the system will start to collapse, and they will intervene again.  I doubt they have the balls to stay the course through what appears to be an impassable wall of flames, and will instead huddle in a corner and wait to die from smoke inhalation, or perhaps outright burn to death.

Wed, 07/21/2010 - 07:26 | 480517 New_Meat
New_Meat's picture

1936-1937

Wed, 07/21/2010 - 00:32 | 480306 element115
element115's picture

All these lost jobs will never come back. Companies are neck-deep in cash and record profits, but they are trimming staff, not adding. And what happens when those profits and bank receipts go away? They won't be hiring then, either.

While I sympathize with the long-term unemployed, some hard choices need to be made. The next political hot potato will be the "99ers." As more and more people are unemployed, for longer periods of time, where does the dole end? 99 weeks? 125 weeks? Never?

Some hard choices need to be made in the not-too-distant future. There will be winners and losers.

Wed, 07/21/2010 - 00:54 | 480327 RoRoTrader
RoRoTrader's picture

nice roundell e115........looks like something from british maylasia, maybe?........the point about hard choices; why not start with the Banks???

To be blunt it seems very much like the FED sort of left the employment issue to "suck the hind tit" in favor of bonuses for TBTF when it came to deploying taxpayer funding.

Wed, 07/21/2010 - 02:53 | 480425 gs_runsthiscountry
gs_runsthiscountry's picture

You guys are both right, but i would add.....

You can not stop the march to equilibrium, with, the populous of second and third world countries. Our comparative advantage in the US lies where? Financial engineering, building cheap houses at elevated prices? Service industry? flooding the US with Nurses and Radiology techs? …....give me a break?

Globalization will continue and when countries such as China, or other parts of Asia, meet more or see labor unrest, it will be on to the next country (not the US).

The staggering improvements in productivity within our own borders leave more and more people in this country structurally unemployed, many educated people have no where to turn at the moment.

Those, structurally unemployed, that are now retraining themselves may find they hit a brick wall when finished with their training, schooling or college degree. Why, because, of the 20%+ unemployed in this country that are actively retraining will find themselves all chasing the same jobs. A future of Americas newly retrained, all chasing a saturated market, once again, overcapacity mode. This will, btw, will be about the time hyperinflation starts kicking in, in our economy.

Point being, 2-4 years out when these newly trained people hit the labor market they will have been chasing the wrong professions. The overcapacity in the economy that cut loose has left the unemployed staring at a job market with jobs that are not coming back. What are we to do with these people, go back to letting them swing a hammer and put up drywall in the next housing boom? lol

To the astute posters on this board, I ask you, do you hear ANY politician that have an answer as too where the new jobs are to be created and where they are coming from? (And BTW, spare me the GREEN ENERGY BS, you cant have “green jobs” without an energy policy. A policy that lets corporations and consumers know there is a commitment, for example, infrastructure)

You don't, I submit, because non of them really know that answer. The ones smart enough to know are not about to open up their mouth, because they don't want to loose votes.

One of the answers is to get back to long term thinking in this country. How do you do that, well, most on ZH wont like what they hear. It involves traders and financial engineers going by the wayside in this country, riding ourselves of ridiculously leveraged derivatives and getting back to more rational risk taking. (also known as banking and real investing). Maybe, then maybe, capitol will start a true flight to investment, and healthy speculation, into industries/areas with a future. Invite innovative risk taking in the area of R&D and manufacturing. That wont happen until Wall Street stops punishing companies quarter by quarter. Stops rewarding directors and executives for a “shit job” well done. Shareholders having rights would go a long way to that end. (too bad fin-reg just screwed that idea) Get these shortsighted boards of directors out of our corporations. Oh, and while you are at it, we need to start paying real engineers in this world more than the financial engineers. 60K a year?, to be an engineer, after spending 6 years and a lifetime in student loans, yeah right. Anyone on this board know difficult an engineering degree is to attain, vs that MBA?

Sorry folks, even many of you that frequenting ZH will have to “work” for that unit of “work” behind that fiat currency you hate so much. Yep, we cant all sit behind “puters” and click digits and bitch about economists for a living. Folks, some people will have to do “the real work” and get paid for innovation outside the financial world.

Right now, no one wants to do that, Wall Street, Banks and Financial Institutions are telling the smartest minds in America, born here or imported, the place to be, and value is, in financial industry. It is also telling main street investors, hedge and pension fund managers, America isn't worth investing in, rather, only worth trading.

 

 

Wed, 07/21/2010 - 07:33 | 480519 duo
duo's picture

In a nutshell, all the productivity gains since the '70s have been siphoned off by the FIRE economy instead of raising the standard of living of the productive economic players.

You could probably add government to the ranks of the leeches.

OT...somebody pull the brain slug off of Kernan.

Wed, 07/21/2010 - 07:49 | 480529 Mentaliusanything
Mentaliusanything's picture

Oh yes ! to be measured a penny at a time make you chase cheap instead of innovative.

Only a real Engineer could write this truth. Pity there is no money pushing this barrow. Financial Engineers make what?  You bloody well trained them ( wealth producers) and they went home, copied you and found a labour rate advantage. Now you have a printing press and reserve currency and fuck all else except to sell the 'dream' on Elm street to the believers in change - and their getting it - nickel  and dime at a time. 

Wed, 07/21/2010 - 11:03 | 480790 Gwynplaine (not verified)
Gwynplaine's picture

gs,

As an engineering graduate, I was among those structurally unemployed.  I can tell you from years of hard experience with science/engineering recruiters that there is only a marginal call for production within the US.  One recruiter suggested that civil engineering was the only viable specialization within the domestic economy.

Companies are basically maintaining current facilities to extract that last marginal dollar from the initial investment.  There is no large movement towards the creation of new productive capacity.  CapEx is just barely above depreciation.

If you think of a good long term solution, please let me know.  It seems more like a political solution is required rather than a problem of investment or labor allocation.

Wed, 07/21/2010 - 12:01 | 480925 gs_runsthiscountry
gs_runsthiscountry's picture

 

I spent 19 years in manufacturing engineering. I speak from experience, am one of the structurally unemployed, retraining myself for a new career. Manufacturing is on its last gasp in this country and all but a corpse. I will not peruse a field there is no future in.

As for having an answer, i only threw out a few starting points, or talking points as it were.

 

Yes, a political solution is what it will take. A politician that is the nimblest in foreign policy and breaking down trade barriers. But as i said, in my eyes, its a march to equilibrium that is still in motion and cannot be stopped.

-------

To those that think unemployed are lazy. I, until a year ago, have “never” been unemployed 26+ years working. I have worked since the age of 14, dishwasher, body shop, odd jobs etc. all to save for first stint in trade school, that started 5 days after i graduated High School. After trade school and 2 years into college started working FULL TIME and going to college evenings. Interned at a career position with another company, then working 50 + hours a week and going to school 25 hours in the evening. Furthermore, after having worked for 25 years my employer has paid unemployment insurance on my behalf. Is it my fault the state is going broke?

In any event, i don't count, you see, I am not counted as unemployed. I am part of the BLS funny numbers called EU, I am a displaced worker. Oh, and by the way those years of paying taxes, and now as a displaced worker, i should be having my schooling paid for by the Gov. (WIA) But, my state is out of money, even though I qualify. I also qualify as a foreign displaced worker (TAA), but, to my surprise there are so many people unemployed in this country the federal government cant get to my companies case, its been 15 months already. At this point, they may be out of money too. Student loans?, what are those. Those are based on your previous years taxes. Heck, I don't know how some unemployed even pay for retraining at this point. I consider myself lucky.

So, do I sit on my arse? ...No, i pay for college out of my own unemployed pocket and savings. Unlike the rest of America i actually lived within my means and didn't live high off the hog all these years. I also volunteer my time on campus helping younger students, staff and mentoring. When I am not doing that I am writing letters or conversing with local politicians and corresponding with my states senators and congressmen. If your not part of the solution, you are part of the problem.

So, as one congressmen Kaufman so eloquently put it last night. The problem with a lot of people these days, is, “They were born on third base, but think they hit a Triple.” In other words, get off your high horse will ya.

 

Wed, 07/21/2010 - 17:11 | 481888 Mariposa de Oro
Mariposa de Oro's picture

gs_runsthis country,

I work for this company. They are looking for engineers. We are located outside CONUS, thus we pay no federal income tax. I've been here for three years now. Not for amoment have I regretted it. Check it out. Let me know if you're interested...

http://www.krsjv.com/Pages/CareersNew.aspx

Wed, 07/21/2010 - 01:48 | 480394 midtowng
midtowng's picture

The 99ers are f*cked. If they can barely get the first 99 weeks extended when unemployment is around 10%, then people who've used their 99 weeks will never see another dime.

  The only unlimited socialism these days are for the very rich.

Wed, 07/21/2010 - 02:51 | 480420 sethstorm
sethstorm's picture

Some hard choices need to be made in the not-too-distant future. There will be winners and losers.

Start by making it harder for those employers to say no to someone.  Turn that uncertainty into certainty.

 

 

 

Wed, 07/21/2010 - 06:26 | 480492 Bendromeda Strain
Bendromeda Strain's picture

And yet the lefties hate them some WalMart, the only company I know who hires the dimwitted and gives them an opportunity to feel productive worth. No, I am not talking about the disabled, I am talking about your run of the mill slack jaw. Oh wait - I forgot the TSA!

So who exactly are the those employers you have focussed your progressive laser beam on? Do tell.

Wed, 07/21/2010 - 10:30 | 480730 Johnny Bravo
Johnny Bravo's picture

Bosses that cut their staffs one day, and then cut themselves a 30000 dollar check to piss away in Vegas in four days a few days later?

Wed, 07/21/2010 - 07:20 | 480512 anony
anony's picture

We began to enter the Post-Labor world with the advent of computers. We are only at the tip of a century of re-thinking and reacting to a world we have never known, wherein labor as we know it, 9-6 jobs, shifts, and earning one's way by trading their time for money, the use of his/her efforts, will gradually disappear.

A new paradigm will have to surface. Most likely the big brains in government and politics already know this and may have plans to combat the worldwide decline in productive jobs.  Or not.  Whether they do or not, something will have to emerge that occupies the time of people on earth when their jobs are taken over by machines, or go insane.  Vonnegut, that soothsaying genius, predicted it decades ago in, Player Piano."

Wed, 07/21/2010 - 07:36 | 480520 New_Meat
New_Meat's picture

anony-

"We began to enter the Post-Labor world with the advent of computers."

Beg to differ in fact, but not in principal: wind power, water power, and steam power were the beginning.  But Johnny von Neumann, Grace Hopper, Feynman et al. certainly added impetus.  Point being that we have seen this vast "creative destruction" before.

"Most likely the big brains in government and politics already know this..."

I just spit tea all over the new flat panel, had to wipe it up.  I'd say it will be worth your while to research what the "big brains" in this government were doing in the '60's.  I'd suggest starting with NYT 9/11/2001 front page, below the fold.  Maybe research "Weather Underground."

- Ned

Wed, 07/21/2010 - 00:36 | 480307 Misean
Misean's picture

Bart: Didn't you wonder why you were getting checks for doing nothing?
Grampa: I figured it was because the Demmie-crats were back in power.

Wed, 07/21/2010 - 01:25 | 480364 Oh regional Indian
Oh regional Indian's picture

Sheeple Containment Playbook.

Rule 4: Keep feeding them just enough to keep them fed, with bad enough food to keep them sick.

The above comment comes from having stood in line and watched welfare moms load up on chips and soda and really bad candy.

For what is coming down the pike in a scant few weeks, the sheeple need to be as compromised and satiated as possible.

ORI

http://aadivaahan.wordpress.com

Wed, 07/21/2010 - 08:15 | 480550 zhandax
zhandax's picture

Sounds like you are looking up?

Wed, 07/21/2010 - 01:32 | 480370 Moonrajah
Moonrajah's picture

Jeez, this is so transparent, you can almost hear what they were thinking/saying at the time of the making of this bill.

"Hey, the sheeple have started to lose their hay since May and are slowly realising that something's rotten in the state of Denmark"

"Why Denmark?"

"Nevermind. All I'm saying is that we have to throw 'em some hay to keep 'em from braying. Otherwise they'll figure out that they're headed for the slaughterhouse"

"Good idea, big O. But where will we get the money for that?"

"Ben, are you pulling my leg here?"

"Sorry, I was just trying to make you lol. Oh, whatever"

Wed, 07/21/2010 - 02:11 | 480416 carbonmutant
carbonmutant's picture

 Is a November extension enough to prop up retail buying for the holidays?

Wed, 07/21/2010 - 06:28 | 480494 Bendromeda Strain
Bendromeda Strain's picture

See Christmas in July promotions...

Wed, 07/21/2010 - 07:10 | 480507 Mentaliusanything
Mentaliusanything's picture

From that cult movie 'Blade Runner'

Rachael: Do you like our owl? 
Deckard: It's artificial? 
Rachael: Of course it is. 
Deckard: Must be expensive. 
Rachael: Very. 
Rachael: I'm Rachael. 
Deckard: Deckard. 
Rachael: It seems you feel our work is not a benefit to the public. 
Deckard: Replicants are like any other machine - they're either a benefit or a hazard. If they're a benefit, it's not my problem. 

But in the End

I've seen things you people wouldn't believe.... Hmmf .... Attacking Investment Banks on fire over the shallowness of Greed, I've watched Governments grow weary of lies and deception and HFT algorithims open the gates of Hell only to be swallowed by their own inverse functions.

All of those..'moments' will be lost in time, like tears...in rain.
Time to die.

Apologies for disturbing a great verse - but it is true!

 


Wed, 07/21/2010 - 09:25 | 480628 barkingbill
barkingbill's picture

ah get off it....if we gave the banker scum trillions why not give the out of work people of this country a little bit as well. this at least might actually trickle down as opposed to the banker bonuses which probably get spent on the isle of capri or somewhere even more exotic. 

Wed, 07/21/2010 - 09:32 | 480639 jailnotbail
jailnotbail's picture

We began to enter the post-labor world when the political and corporate elites started offshoring production and began their war against the middle class, insuring that now, over thiry years later, real wages are lower than they were in the 1970s.  You want to know why they all went into hock?

At the same time, the economic elite started getting those supply side justified tax cuts. Remember those? The sell was that you give the money back to the people who "earned" it and they'll invest it in the economy and create more jobs for everybody and the invisible hand will give us all an encouraging pat on the back and all will be well.

It was crap from the beginning, and Reagan's budget director at the time admitted it later.  The idea was to "starve the beast", to use Grover Norquist's endearing term for shrinking social services by eliminating the revenues.

Only the  Republicans lost their nerve. The captains of scorn for all things govenmental decided that rather than actually make any cuts that might alienate  the electorate, they'd just run up a little debt. And so it began.  The elites were only too happy to lend back to the government the money that the government had formerly collected as tax revenue, that is when they weren't running up the market speculating with it, which, after all, is the economic result that you really get when you give a bunch of money to people who already have more than they know what to do with.

Well, it's great fun to run down these lazy good for nothing bums on welfare isn't it? Hey, you know it wouldn't be, you know, right to blame some ethnic group like the Jews for all our problems now like the Nazis did.  Some of my best friends are Jews after all, and hey, they've got serious cash.  But these worthless unemployed just laying around collecting money and running up the debt, you know I think we might have something we could work with here.  I'm thinking concentration - whoops, forget I said that, I meant "work" camps. Let them earn the right to eat like the rest of us instead of moping around while we give them our cash.

Well, maybe we'd better hold up on demonizing the poor and unemployed for running up our debt for nothing.  Because see, what all you bright boys seem to forget, time and time again, is that if nobody's buying your chevrolets, or big screen tvs, or in the case of these pathetic scapegoats maybe something more like a loaf of bread and a gallon of milk, then the whole machine slows down.  If Best Buy ain't selling big screens I got news for you. They got no earnings and your stock goes down.  And if the useless eaters aren't slinking into that convenience store your brother-in-law owns to buy milk and bread, the cumulative effect eventually puts your brother in law out of business.  He shows up on your doorstep  with your sister and her two snot nosed kids, with her crying, wanting to know if they can set up the camper in your backyard.

Once the relentless cyclone goes into reverse and starts corkscrewing down, pulling people into it's maw, the process accelerates, and what's left of this absurd casino we call an economy gets sucked down pretty quick.  Nobody here gets out alive, unless you're one of the elites, then I guess you get to watch the National Guard shoot rubber bullets and tear gas at the rest of us on one of those big screen tvs,  and round us up by the thousands in sports stadiums, our wrists bound behind our backs with those plastic ties the cops use for handcuffs when things get out of hand.  See, they're not going to just quietly sit at home and listening to their kids ask if the water is ever going to get turned back on, or when they're going to get to go to the mall and get some sneakers for gym class.  It won't take until they're actually starving.

But the trend among the pundits is definitely towards introducing some variant of social unrest on a massive scale as one of the worst case scenarios that has to be assigned some probability. I guess maybe you multiply the probability times twice the number of rounds it usually takes to bring someone down, and buy that much extra ammo. The last thing you do is give the scum a handout, if you've got anything to say about it. But of course you don't, yet, so you'll have to wait for now. Use the time productively, to focus on these peons.  You can safely push them around, because you think they won't push back. Like that $25 billion really was pivotal in this whole sorry episode orchestrated by the privileged with the eager assistance of the semi-affluent.

 

These people didn't create this situation.  The privileged classes did.  These people just went along for the ride, did whatever their was to do to get by.  They were carpenters or landscapers or real estate agents.  Hey, that's where all the jobs were, right?  It never crossed their minds that it was all a huge bubble, soon to collapse like all bubbles. See up until now they've pretty much just had a blind trust that their political and economic elites will basically look out for the little guy.  So they didn't pay any attention to that economics stuff, which they really don't understand anyway.

They're paying attention now. They're not sure exactly what happened, but they know they got screwed, and they have a pretty good idea who did it. Well, they don't know exactly who's responsible, but they know how to identify members of the class. It's easy. They're the ones who still have jobs, drive fancy cars, and still have houses, in nice neighborhoods.

They've had enough. So go ahead. Screw the measly 25 billion or whatever it was in unemployment benefits.  It'll be like putting  the cap on a pressure cooker. 

I'm so tired of the semi-affluent professional classes dissing these poor bastards.  I'm looking forward to the denouement, which that class seems determined to hasten.  I can't wait to hear the tumbrils roll through the streets.

Wed, 07/21/2010 - 10:35 | 480738 SRV - ES339
SRV - ES339's picture

While I get the feeling we are miles apart on many issues, I couldn't argue with a thing you say here.

I'm afraid I just don't understand the contempt for the "victims" of this fraud and corruption by the elite, especially by the ZH community, one that usually understands who the real villains are in this play. I guess old habbits (believing the poor are just lazy) are hard to break.

Wed, 07/21/2010 - 10:47 | 480760 MilleniumJane
MilleniumJane's picture

@jailnotbail-Thank you!  I get so tired of the comments bashing the poor and middle class for their "poor choices."  It's like telling the woman who was raped that she deserved it because she was dressed provocatively.  The truth is, we have been led down one of those cattle chutes to the slaughterhouse.  WHO HAS BENEFITTED THE MOST FROM GOVERNMENT POLICIES OVER THE LAST THIRTY SOME-ODD YEARS?  It hasn't been the middle class.  It sure as hell hasn't been the impoverished.  Social programs have been dismantled and reorganised into chaotic schemes that benefit no one but the upper-managers of these programs.  Welfare, Medicare, the Food Stamp program all used to be fairly straightforward programs whose goal was to win the war on poverty.  Now it seems that every month, a new embezzling or cheating scandal arises.  It's sickening.

 

And it is insulting to me that some people view myself and the hardworking members of my family as "useless eaters" or "slack-jawed idiots."  I first benefited from the Welfare system when at the age of 6 my mother left my abusive father.  She went to college and became a bookeeper, which never would have happened without help from the government.  She hated every minute that she was on the dole, but through hard work and effort she came out ok.  My grandfather, who served in WWII, benefitted from food stamps and medicare.  He was the hardest working man I ever met, but was forced to retire in his 60's on a pittance due to a bad hip.  So, many of you think my loved ones are nothing but useless, brainless, worthless meat puppets?  I hope when all this washes out, karma gets your asses.

Wed, 07/21/2010 - 11:03 | 480791 SRV - ES339
SRV - ES339's picture

With you all the way... "you go girl!"

It's those born into privilege (middle class and up) that believe this stuff... those of us who started "dirt poor" and had to battle for our success (or even just to reach middle class) do not forget.

Your story is one of the "true" hero's of America (or any other country for that matter)!

Wed, 07/21/2010 - 12:11 | 480945 JW n FL
JW n FL's picture

Let’s call it $2 Billion a month in benefits paid out... just for conversational proposes...

$750 Billion (TARP) =’s 375 Months… or 31 plus years of benefits?

I think we all can agree that the stimulus Packages… or monies being poured into the AAA Rated Corporations coffers exceeds the trillion dollar mark in multiples…

So, is the burden of debt really a bunch of couch potatoes milking the system? Or is the real problem or the real burden the amount of monies being poured into Wall Street?

The real problems are belittled daily by a bunch of wanna be Republican Conservatives… who pontificate about people pulling themselves up by their own boot straps or abortion... while the Country is Robbed Blind!

Drill Baby! Drill!!

Austerity Measures! For / or Against the un-employed / fellow American Country Men and / or Women… while we (as a Country) offer Tax Breaks to Companies who move Jobs Offshore / out of the United States.

The Democrats continue on the same path as laid by Bush… The Lobby controls our Government in Total! The Lobby owns US! ALL!! No exceptions!

The un-employed benefits being paid is NOT! the drag that is holding US! As a Country! Back… 

 

Wed, 07/21/2010 - 12:55 | 481061 OutLookingIn
OutLookingIn's picture

 

 The American elite is attempting to keep up the "everything's okay" face that is displayed to the rest of the globe. Behind this facade everything is far from okay. The globe is finally beginning to see the cracks in this facade, as the thin veneer and fading paint begin to peal.

The difference being between the Great Depression and today is hidden. Back then you had soup kitchens and bread lines, with massive migratory movements of labour. Today we have 40 million people on food stamps and millions more trapped in homes with underwater mortgages, hidden away from the plain view of most.

Only the longer this "hidden" problem with society goes on, the more probable that it becomes visible for what it is - a very sick society. When the top 1% own the vast majority of the nations wealth, the disenfranchised eventually strike back. Almost all redistribution's of wealth that take this path - end in blood being spilt. The blood of mainly the elite, who end up extinct, as the disenfranchised far out number them.

This is what scares the 'be jebus' out of the present ruling elite and why emergency unemployment benefits will be extended for as long as it takes. After all, the ruling elite is just spending the future earnings of the working poor! Giving them their own money in advance! Aint capitalism great!

Wed, 07/21/2010 - 13:12 | 481092 jailnotbail
jailnotbail's picture

Not that the law actually means anything anymore, but this seems a propitious moment to review the Fed's statutory mandate.  The first reference to it that Google turned up was in this recent speech by former Fed Governor Mishkin:

Governor Frederic S. Mishkin

At Bridgewater College, Bridgewater, Virginia

April 10, 2007

Monetary Policy and the Dual Mandate

Thank you for inviting me to talk with you today.1 I would like to direct my remarks to the macroeconomic mission of the Federal Reserve System. I wish to note that these remarks reflect only my own views and not those of the Federal Reserve Board or of anyone else associated with the Federal Reserve System.


In a democratic society like our own, the ultimate purpose of the central bank is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977.

 

According to this legislation, the Federal Reserve's mandate is "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Because long-term interest rates can remain low only in a stable macroeconomic environment, these goals are often referred to as the dual mandate; that is, the Federal Reserve seeks to promote the two coequal objectives of maximum employment and price stability. In the remainder of my remarks today, I will describe how these two objectives are consistent with our ultimate purpose of fostering economic prosperity and social welfare. I will then talk about some important practical challenges in implementing these goals.

 

According to this legislation, the Federal Reserve's mandate is "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Because long-term interest rates can remain low only in a stable macroeconomic environment, these goals are often referred to as the dual mandate; that is, the Federal Reserve seeks to promote the two coequal objectives of maximum employment and price stability. In the remainder of my remarks today, I will describe how these two objectives are consistent with our ultimate purpose of fostering economic prosperity and social welfare. I will then talk about some important practical challenges in implementing these goals.

 

Now I'm sure that  Bernanke could spin some yarn about how intravenous injection of liquidity to the investment banks that created this crisis, while serving as a landfill for the deposit of their toxic waste,  ultimately serves the purposes of moderate long term rates, and promotes maximum employment.  After all, sophistry's the only real qualification for a Fed chairman.

 

But I really have a hard time identifying any policy action over the last couple years - hell, over the last decade - which appears to have been even secondarily directed at promoting full employment. Unless you want to count Greenspan's bubbles,  and it hardly seems reasonable to consider those rational attempts to promote full employment, since that would have depended on the bubbles not bursting, and as  Jeremy Grantham never tires of reminding us all, of the twenty or so that he's studied, that's never occurred.   Since a bubble's a anomaly by definition,  it would be absurd to claim that anything that resulted from it was anything but transient . That's why, by his own assertion, Greenspan was one of maybe five people in the financial world who couldn't recognize a bubble.  The middle class got left way behind a long time ago by the Federal Reserve.  It's been openly representing the interests of the financial class over those of the labor force for so long that if I hadn't found this speech by Mishkin, I'd have a good prima facie case that everybody on the Fed Board of Governors forgot all about the "coequal" status of the employment part of that mandate years ago.

 


 


 

 

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