Action alert
The single most frightening statistic out of this recession is this one: 41 percent of unemployed workers have been out of work for 27 weeks or more. This is vastly higher than in previous recessions.
26 weeks is the maximum length of time that workers can receive regular unemployment insurance, but as often happens during a recession, there has been a series of extensions, paid for at the federal level. These run out on Sunday. If nothing happens, 1.2 million workers will lose their benefits starting next week. Even if there’s a one or two day gap, it will cost state agencies a ton of money to reprogram their systems, and cause delays in workers getting their benefits. Extending them should be as closer to a no-brainer as exists in politics, but it is proving surprisingly hard. So, I’m begging everyone I know, call your Senator, and tell them:
1) Pass the short-term extension immediately so benefits don’t run out. It is unacceptable to hold 1.2 million workers hostage so that a few dead millionaires can pay less taxes.
2) Extend benefits until the end of the year. Congress has too much else to get done this year to keep passing short-term extensions and then having to take it up again. And workers need to know that they’re not about to be cut off.
3) Not everyone qualifies for unemployment insurance, and some people just want a job. The TANF Emergency Fund, created under the Recovery Act, gives states money for subsidized jobs for low-income parents, and also helps pay for rising cash assistance caseloads. It doesn’t expire until September, but states are doing their budgets now, and they’ll start shutting down their programs if they don’t know that the money will be available next year. Plus, because it’s part of TANF — aka “welfare” — it has almost no chance of passing on it’s own. So please tell your Senators to ask that it be extended along with UI.
Thanks.
February 26th, 2010 at 8:13 am
Amen, Elizabeth. Thanks for the alert.
February 27th, 2010 at 8:14 am
Here’s a slightly revised version of a comment I sent elsewhere, and which seems relevant here. I’m a declinist, and I like catch-phrases. So: (multiple sources) ‘those jobs aren’t coming back’ and, from Herb Stein: ‘If something can’t go on forever, it won’t’ and, from Jesse Unruh: ‘Son, if you can’t eat their steaks, and drink their whiskey, and fuck their women, AND VOTE AGAINST THEM IN THE MORNING, you don’t belong here.’ Special bonus anecdote, from Charlie Munger:
“…suppose you’ve got a very talented ethnic group, like the Chinese, and they’re very poor and backward, and you’re an advanced nation, and you create free trade with China, and it goes on for a long time.
Now let’s follow and second and third order consequences: You are more prosperous than you would have been if you hadn’t traded with China in terms of average well-being in the United States, right? Ricardo proved it. But which nation is going to be growing faster in economic terms? It’s obviously China. They’re absorbing all the modern technology of the world through this great facilitator in free trade, and, like the Asian Tigers have proved, they will get ahead fast. Look at Hong Kong. Look at Taiwan. Look at early Japan. So, you start in a place where you’ve got a weak nation of backward peasants, a billion and a quarter of them, and in the end they’re going to be a much bigger, stronger nation than you are, maybe even having more and better atomic bombs. Well, Ricardo did not prove that that’s a wonderful outcome for the former leading nation. He didn’t try to determine second order and higher order effects.
If you try and talk like this to an economics professor, and I’ve done this three times, they shrink in horror and offense because they don’t like this kind of talk. It really gums up this nice discipline of theirs, which is so much simpler when you ignore second and third order consequences.
The best answer I ever got on that subject – in three tries – was from George Shultz. [Shultz was an MIT economics professor before becoming Secretary of the Treasury and Secretary of State.] He said, “Charlie, the way I figure it is if we stop trading with China, the other advanced nations will do it anyway, and we wouldn’t stop the ascent of China compared to us, and we’d lose the Ricardo- diagnosed advantages of trade.” Which is obviously correct. And I said, “Well George, you’ve just invented a new form of the tragedy of the commons. You’re locked in this system and you can’t fix it. You’re going to go to a tragic hell in a handbasket, if going to hell involves being once the great leader of the world and finally going to the shallows in terms of leadership.” And he said, “Charlie, I do not want to think about this.” I think he’s wise. He’s even older than I am, and maybe I should learn from him.”
So how do I tie this in with your post about TANF and long-term unemployment benefits, etc? I think we are in a relative decline. Used to be, you could get out of high school, take some welding courses at community college, and go to a middle class life making cars, or earth moving equipment. You could get out of 9th grade and go to a decent life making tires. In previous hard times, even when Studebaker went down, manufacturers and financiers had real incentives to do things in the USA even if it was costly because it was so difficult to do them elsewhere – other governments were corrupt and shook you down, other places didn’t have dependable power and telephone service, you couldn’t hire skilled welders, etc. So from your Studebaker job, you could go somewhere else with your skills. Things have changed elsewhere, and USA is not a monopoly provider of infrastructure, there are good phones in Shanghai and Singapore. Perfectly adequate vehicles can be built in Ulsan. We have to be competitive now in a way we didn’t before, or people just won’t buy Chryslers. So now when Chrysler goes down, those jobs go to Ulsan, and tiding people over is forever, not a year. And it seems to me that TANF and 6-mo extensions on unemployment eligibility has an underlying assumption that those jobs will come back.
Now, some people are relatively sheltered from all this, and it’s luck, not skill. You got out of 9th grade in Akron and instead of going to the tire factory you got a job as a cleaner in the public schools. Pretty random choice, the immediate results were nearly the same, you lived next door – now the tire plant is gone, you have both retired, your wage went up 2% per year for years and years and years with union agreements with the schools and you have a nice pension based on that last income – and the tire guy next door who lost his job in 1986 is really skint. No hope for him. This is playing out across the economy.
Once we enabled public sector unions/ teacher’s associations, etc., we had negotiators on the employee side of the table who were thinking about the 50-year interests of their people. Once California put in term limits in the legislature, you had negotiators on the government side of the table who were thinking about the 4-year interests of the government, with the concomitant incentive to kick the can down the road past where they could be held responsible. Unruh-type long-term thinkers who acted as though they would be taking responsibility in ten years for decisions made today were gone. Avoid a transit strike now by making pension concessions which will kick in in ten years? No-brainer! Put a slightly-above-real-inflation escalator on Social Security payments which will have almost no effect on current budget problems? No-brainer!
Willie Brown said recently in his weekly column in the San Francisco Chronicle:
“The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life … but we politicians — pushed by our friends in labor — gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages . . . this is politically unpopular and potentially even career suicide . . . but at some point, someone is going to have to get honest about the fact.”
There is a well written and a little tendentious history on this in the Phillip Greenspun blog: http://blogs.law.harvard.edu/philg/2009/09/07/history-of-public-employee-unions/
If we are trying to learn from history, I think we will do well to look at the 50s and early 60s in Britain, and their attempts to manage decline while groups within the society struggled to get the greatest share of what remained. That suggests a situation where a new Thatcherism could gain a foothold – I am worried, and not sure that’s the best way to distribute the (relative) losses which come as others can do what we have. I don’t think we can keep going with schlubs in Lodi flipping burgers and paying state taxes which go to make up CALPERS investment losses and to maintain $400,000 pensions for retirees from the City of Vernon. Short term extensions on unemployment insurance won’t do it, nor will TANF.
February 27th, 2010 at 8:16 am
Doesn’t mean we shouldn’t DO short term extensions on unemployment insurance won’t do it, or TANF. But I think it means that won’t be successful long run, and we are going to have to think in a more global way about how losses get spread around.
February 27th, 2010 at 10:01 am
Brad DeLong asserts that wages don’t need to fall, demand needs to rise, but otherwise buys into the idea that protecting some people from decline is a problem. http://delong.typepad.com/sdj/2010/02/i-endorse-almost-everything-alex-tabarrok-says-here.html?asset_id=6a00e551f0800388340120a8d8e58e970b
I can’t see how you get more demand, though, when nobody wants to buy our Boeing airplanes or Chryslers anymore, and Bollywood takes away our movie market.
February 28th, 2010 at 8:27 am
Nice graph on the theme of moral hazard in unemployment benefits: http://caseymulligan.blogspot.com/2010/02/supply-matters-even-during-deep.html