The Punishment Cure
By PAUL KRUGMAN, NYT
Six years have passed since the United States economy entered the Great Recession, four and a half since it officially began to recover, but long-term unemployment remains disastrously high. And Republicans have a theory about why this is happening. Their theory is, as it happens, completely wrong. But they’re sticking to it — and as a result, 1.3 million American workers, many of them in desperate financial straits, are set to lose unemployment benefits at the end of December.
Merry Christmas.
Now, the G.O.P.’s desire to punish the unemployed doesn’t arise solely from bad economics; it’s part of a general pattern of afflicting the afflicted while comforting the comfortable (no to food stamps, yes to farm subsidies). But ideas do matter — as John Maynard Keynes famously wrote, they are “dangerous for good or evil.” And the case of unemployment benefits is an especially clear example of superficially plausible but wrong economic ideas being dangerous for evil.
Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
(More here.)
Six years have passed since the United States economy entered the Great Recession, four and a half since it officially began to recover, but long-term unemployment remains disastrously high. And Republicans have a theory about why this is happening. Their theory is, as it happens, completely wrong. But they’re sticking to it — and as a result, 1.3 million American workers, many of them in desperate financial straits, are set to lose unemployment benefits at the end of December.
Merry Christmas.
Now, the G.O.P.’s desire to punish the unemployed doesn’t arise solely from bad economics; it’s part of a general pattern of afflicting the afflicted while comforting the comfortable (no to food stamps, yes to farm subsidies). But ideas do matter — as John Maynard Keynes famously wrote, they are “dangerous for good or evil.” And the case of unemployment benefits is an especially clear example of superficially plausible but wrong economic ideas being dangerous for evil.
Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
(More here.)
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2 Comments:
Is Krugman to suggest that we would better off if we would double all 'benefits?' The people who are being punished are the taxpayers working in what is left of a private economy. Set men free and watch them soar! (A. Lincoln)
Paul Krugman has a self-fulfilling theme - if only we had spent more. He can point to any failure - no matter how much has been spent on that failure - and claim 'if only we had spent more' to cure all that ails.
The government could spend a trillion, 10 trillion, a hundred trillion, 500 trillion, a quadrillion, a quintilliion on failure after failure...and Krugman would say 'if only we had spent more'.
I say follow the Krugman Rule that if whatever Krugman says to do, go to the exact opposite. If Krugman says 'spend a trillion', then slash the budget by a trillion immediately. If he says 'raise the tax rate to 90%', then immediately cut the rate to 10%. Follow the Krugman Rule and you'll find your way to prosperity for all!
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