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In the expected “compromise” on the Bush tax cuts, there’s talk that Democrats would get a one-year extension of unemployment benefits, without offsets. That would be a $65 billion dollar “stimulus package” that is actually decent stimulus. From a macroeconomic standpoint, you wouldn’t want to pay for unemployment benefits, as they bring substantial benefits to the economy and will increase aggregate demand as deficit spending.
And deficit spending is the way to do it, economists say, because expanded government outlays make up for slackened demand in the private sector. “Current deficits impose no burden on the economy because there are massive amounts of idle capacity,” said progressive economist Dean Baker in an email to HuffPost. “The Federal Reserve can simply buy and hold the bonds to finance the deficit so it doesn’t create any interest burden. This should be a real no-brainer.”
Considering that the Fed has pushed for fiscal stimulus and has the mechanism through QEII to buy the bonds, this is clearly a realizable scenario.
The White House actually came out pretty strongly today in favor of needing to extend unemployment benefits, producing a Council of Economic Advisors report showing the economic impact.
Failure by Congress to act on extending unemployment benefits will have stark consequences for Americans this holiday season, according to a new report from the White House Council of Economic Advisers. Two million Americans in December alone – and nearly seven million over the course of the next year – will lose the temporary support that helps them keep food on the table and make ends meet while they search for a job if Congress fails to act.
“Extending this support to those hardest hit by this crisis is not only the right thing to do, it’s the right economic policy,” said CEA Chairman Austan Goolsbee. “Letting millions more Americans fall into hardship will hurt our economy at this critical point in our recovery and immediately undermine consumer spending.”
Without extended benefits, the country would have had 800,000 fewer jobs as of September 2010, and failure to act to extend benefits again could cost the nation 600,000 jobs by the end of next year.
Data actually shows slight improvement in the economy, but that’s compared to the awful stagnation of the summer, and it’s simply not enough growth to get 15 million Americans back to work. Extending unemployment benefits is both humane and practical economics. If we’re going to give giant tax cuts to millionaires, it’s the least we can do.
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It’s a horrible shame to think that extra tax cuts for millionaires is the price America has to pay for allowing our unemployed countrymen and -women to keep food on the table and a roof over their childrens’ heads this Xmas.
If they are going to extend the tax cuts 2 or 3 years, maybe the UI should also be so extended? At least as long as unemployment exceeds 6.5% or whatever the historic measurement for extending benefits has been….
Give it time, and you’ll hear Obama and his Republican pals calling for cuts in Social Security to offset unemployment extensions.
That’s always the way, keep two groups of the powerless fighting each other. In this case, the elderly resentful of those who are unfortunate enough to be jobless.
What a-holes. Maybe they should make the pukes fillibuster unemployment extension and let the tax cuts for the rich expire.
This is the first thing they’ve done right in a while. I’m impressed, but wary. Fool me once, shame on you …. blah blah, right?
While Congress jerks around Americans in desperate need of help, we can ease some of the pain of our neighbors, right?
Raleys/Nob Hill/ Bel Air foods has a great program. I’ve donated to this the last three times I’ve grocery shipped. It’s only $10, and look how much you can help!
I don’t care if they include a cure for cancer in the tax cut bill. If Congress cuts taxes for rich people, I’ll never vote for another Democrat as long as I live. Period.
Yeah, how many times are you going to say that?
Are you feeling any better?
My only complaint with this trade-off is that Dems get only ten percent (62B in unemployment insurance (UI) extension) of what the GOP get for their wealthy clients (700B in taxcut bonuses). Why should Dems settle for so little? Are you hearing that the White House (WH) will also get START ratified as part of same deal? What else would convince WH to sell out middle class for so little?
nice. I’m with you.
Kabuki. The extension was coming anyway.
We should remember the silence of the Rich folks on this tax gift they are demanding for themselves, when they dare to run for office in 2012. Most of the pols are millionaires.
this is from Goolsbee. He replaced Romer. He’s on Univ. of Chicago economics faculty. Not a crazy Friedmanite, like many of them. Ironic that he seems to be starting out more populist than Romer, who just returned to faculty at Berkeley (sp?).
Gee, an enormous giveaway for the very wealthiest Americans is populist? Good to know.
I think I just threw up in my mouth. Gotta hand it to the GOP. They can hold the poor and destistute of this country hostage until they get everything they want for the corporations and wealthy and still come out smelling like compromise. Way to lead Obama
BTW, the Fed POMOs are running about $7 billion per day and they’re running one every trading day (they took a couple of days off over Thanksgiving week, then ran two on Monday). So this amounts to less than two weeks of QE2. The new schedule will be announced in a week or so, and I would guess the rate is going to increase, if anything.
We both know the answer to that, it’s one of priorities!
But really–what the Dims should do (and won’t) is to just proceed with the two as separate issues. DON’T LINK them. Announce you’ll proceed with unemployment extension via reconciliation if filibustered. Make the Repugs come crying to you–and they will, because tax cuts for the rich are the only thing they care about. The clock is ticking on the Bush tax cuts, and I predict it’s the Repugs who would get desperate first if the Dims played it right (which, again, they won’t).
stewartm
It was Obama’s take-it-or-leave-it offer :-)
Talk is Obama is very pissed that some Democrats think he cares about them.
so this week Obama wanted to make sure there was no doubt in the minds of any Democrats that he hates FDR, JFK, progressives, democrats, etc.
I would say that Obama had an AWESOME week showing all of his Democratic skeptics that his hate for Democrats is on par with people like his hero Reagan
Obama had a super smile on his face this week after Bush told him he was doing a great job!!!
we’re talking about the CEA advocating extending UI to the tune of $65 billion. That’s all CEA report mentioned. Nothing about taxcut bonuses for the wealthy. I was asking DDay in other comment why should Dems settle for such small change as the $65B when GOP gets $700B for its wealthy clients. But Goolsbee didn’t advocate taxcut bonuses for the wealthy. Quite the opposite, IIRC. Pretty sure Goolsbee is on exactly the same economic page as Krugman when it comes to taxcut bonuses for the filthy rich.
you’re far too rational for that discussion. I am thankful that we will at least get something in return for the billions we are giving to the rich. I think it is a bad deal, but better than nothing. You know, beggars can’t be choosy or something like that.
If we are giving a gift to the wealthy, then we surely should include enough money for the 99′ers in this package, shouldn’t we?
Goolsbee is just another Hamilton Project Rubinite.
I agree emotonally but too many people need whatever they can get. I just wish they had negotiated a better bargain. I think they could have gotten more. Wonder how long they will extend the tax cuts?
I love it when you talk dirty.
What talk is that?
Some will say we should have left it.
Seriously now is anybody surprised by this -
Is all part of the Dance that both parties use to maintain Corporate order.
I am a little surprised as I thought O was going to give it up for nothing at all. I don’t think it is a good deal but given I thought it would be nothing, I guess I’m feeling better, but nowhere near happy.
If Obama was shrewd he wld make sure that the unemployment benefits were extended to at least the spring of 2013. Why give them the tax cuts for two to three years and get extended UI benefits for one year? At least go into your reelection year with millions of people not getting benefits not being an issue. The republicans want the tax cuts for the rich more than anything and the closer they get to expiration the more willing they will become to deal. If Obama wants to deal he shld just wait until he gets something back. Unfortunately, being the doofus that he is he is going to accept anything they throw at him just to say he got a deal and extend the tax cuts anyway. If this is the best democrats can do when they have the majority and the White House why even bother voting for them? Not only are they corrupt they are cowardly and inept.
But isn’t this symptomatic of the way O has played several very important issues in the past? Give just enough to be a sop to ‘the base,’ while caving in important & quantitative respects to the rich & the corps?
Stim comes immediately to mind. Asked for $800 bil when accepted estimates (not the 3% of economists who self-identify as neolibruls who are in charge of O’s econ policy) said it should be $1.2 trillion. Then settle for $700 billion, billing it as the ‘best we could do.’ Ditto composition of stim, which accepted wisdom said: food stamps, unemployment insurance, infrastructure, would give so much more bang for the buck, tax cuts not so much. So O structured stim exactly the opposite, again claiming it was the best he could do.
Setting up libruls to argue among themselves while the rich get richer.
It’s not about the pennies that desperate peeps get. The argument should be that everything O admin does further enriches the rich.
Well they own us. We continue to live based on their goodwill toward us. I for one welcome our new (old) economic overlords.
Yes it was baked in. What I want to know is how is Obama going to spin this, after being on the record so many times for being against extending tax cuts for the richest. “They had a gun to my head, what could I do?” Or, “I changed my mind, live with it.”?
HuffPost
Just the way W did with no WMD in Iraq. Next Correspondents dinner, O will be looking under his desk for the food stamps, UI benefits and then chuckle when he can’t find them.
Ah eCAHN, you may well be getting a call from Cass Sunstein, the compiler of the Official (and Complete) US History … the gist of which will be; “How’d you know that? That is an Official State Secret. For your own safety the government has determined to place you under protective custody.”
DW
Hey, guess what? Obama will cave on tax cuts for the rich and the Republicans will STILL vote against extending unemployment benefits! (See here.)
There is only one party, and they aren’t working for anyone visiting this blog.
Cool! Let me see if I can do the maths. $1 for 15 million unemployed Americans and $10 for Bill Gates. $1 for 15 million Americans and $10 for Rupert Murdoc.$1 for 15 million unemployed Americans and $10 for Warren Buffett . $1 for 15 million unemployed and $10 for Paris Hilton …ad nausem…ad nausem
Any help for us 99ers?
pass it with reconciliation if the backbone is there to kill the tax cut for the rich (why do we want to borrow from China to give money to the rich so our kids can pay the Chinese for funding today’s high end Xmas spending by the rich?) – and include the stimulus tax cuts that are in the earned income credit and the child care change that helped 7 million kids – things worth $150 billion – worth a great deal more than the rich tax cut of $70 billion a year.
If the GOP is into tax cuts to continue in a down economy without being “paid for”, they have to be for those stimulus tax cuts that help the lower classes – I wonder if our media will point out how they are liars if they oppose the stimulus tax cut extension?
The Mouth of Obama hath spoken:
No, oh Mouth of Obama. Passing even the middle-class tax cuts is not the “most important thing you can do for the economy right now”. In fact, it’s at the very bottom of the things you can do reasonably quickly to stimulate the economy. It’s the least effective thing you can do the stimulate the economy.
In fact, Mouth of Obama, the evidence just might be to the contrary–that if the tax cuts are allowed to expire, then businesses and CEOs might actually not hoard as much money and/or give it to themselves, and feel compelled to either share it with their employees in terms of pay increases, or invest it into new equipment or maintenance. The latter two actions, unlike the first, will actually grow the economy. That is the idea why high marginal tax rates on the wealthy are actually a good thing–it punishes the people in charge of corporate kitties from giving it to themselves.
But the other thing to do, oh Mouth of Obama, and the most stimulative thing is to get unemployment benefits extended. That is at the very top of the CBO list of stimulative things to do. That should be your priority, and a long-term extension at that.
stewartm, hope this helps.
where is the test vote on extending the stimulus tax cuts that helped those on the low end – including 7 million kids – cuts that expire 12/31?
Where is reconciliation?
a two-year extension of all cuts is the plan by Obama – a total cave – these votes are theater for the left to show “we tried”
They forget that doing nothing is an option – let the GOP cut taxes under “not paid for” rules as the Tea Party deficit hawks sit on their hands.
Indeed the one year extension of UE and the extension of the stimulus tax cuts for the poor and middleclass are not even on Reids/Obama’s radar despite their value to the economic recovery being 2 to 4 times as important – what a pile of crap for the base, for the left, for America, as Obama sells out to the rich and corporate – again.
Why, reconciliation is hard. Reconciliation is not doable. Reconciliation has to be saved for the trying to pass the hardest and most important bits of legislation, such as Bob Dole’s 1994 health care “reform” plan. /snark
stewartm
LOL, me too. That should be at least entertaining.
Your only complaint?
But you did get the relevant numbers – same scam as always. Dayen is looking for the silver lining so hard, his career progressive eyeballs are going to pop – you are not going to see that juxtaposition in his writing.
It is not a priority to get 15++ million “back to work”. It is a priority to move the gains from productivity increases to where they should have gone from the start – labor, not rentiers. Work is a means to an end, and underpaid labor does not meet that end – although you wouldn’t learn this from the Dayens of the world.
DDay always gives us the straight skinny. Without his constant digging most of us (me included) would not know our ass from our elbow on these insider economic battles.
I guess its true that the ONLY thing Democrats really want is deficit spending.
The limousine liberals like the tax cuts just as much as the rich Republicans.
Hey Fractal,speak for your own lack of political knowledge and savvy .Why do you assume a defensive position of weakness.We have a populist mandate and the political power to give over 90% tax relief and be the deficit hawks.and yet you,DD and Baker think this is a good deal.You are being played for suckers and squares Obama is either devoid of any leadership spine or a crypto-pub serving as a royalist toady to achieve a Wall St.goal,once again.