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Morning Bell: Back the Baucus Benefits Out of Stimulus
Posted By Conn Carroll On January 30, 2008 @ 9:06 am In Ongoing Priorities | Comments Disabled
As bad as portions of current stimulus package are , it is looking like the Senate, led by Sens. Max Baucus (D-MT), Olympia Snowe (R-ME), and John Sununu (R-NH) , is determined to make it worse by tacking on an extension of unemployment insurance (UI) benefits. There are at least three reasons to keep UI out of a stimulus package: 
Unemployment Insurance was never designed to stimulate the economy. It was created to insure workers against the risk of involuntary job loss. Supporters of UI love to point to a 2004 study purporting to show that every $1 spent on additional UI benefits increases GDP $1.73. That study is flawed . The study erroneously assumes that UI recipients spend every dollar of additional UI benefits. In fact, households respond to more generous benefits by changing their behavior. Only 50 cents of every dollar in UI benefits finances new consumption. More fundamentally, more aggregate demand is not the answer to the recent slowdown because insufficient aggregate demand is not the problem in the first place . A sectoral shift to less risky assets is. UI does nothing to address this problem.
Oh, and did we mention that the current stimulus package includes cash returns for illegal immigrants who pay taxes.  There are enough thorny issues in the currently favored stimulus deal. Let’s not make it any worse.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2008/01/30/morning-bell-back-the-baucus-benefits-out-of-stimulus/
URLs in this post:
 bad as portions of current stimulus package are: http://www.heritage.org/Research/Economy/wm1778.cfm
 Sens. Max Baucus (D-MT), Olympia Snowe (R-ME), and John Sununu (R-NH): http://thehill.com/leading-the-news/senate-snags-stimulus-2008-01-30.html
 least three reasons to keep UI out of a stimulus package:: http://www.heritage.org/Research/Labor/wm1787.cfm
 More fundamentally, more aggregate demand is not the answer to the recent slowdown because insufficient aggregate demand is not the problem in the first place: http://www.marginalrevolution.com/marginalrevolution/2008/01/simple-thoughts.html
 includes cash returns for illegal immigrants who pay taxes.: http://www.foxnews.com/story/0,2933,326346,00.html
 will sign a 15-day extension: http://www.washingtonpost.com/wp-dyn/content/article/2008/01/29/AR2008012902909.html
 any: http://www.reuters.com/article/politicsNews/idUSN2940508320080129
 media: http://www.nytimes.com/2008/01/30/washington/30brfs-BRIEFEXTENSI_BRF.html?ref=us
 reports: http://www.cnn.com/2008/POLITICS/01/29/congress.fisa/
 today: http://news.yahoo.com/s/nm/20080130/wl_nm/iran_nuclear_ahmadinejad_dc_1
 became the latest state to wake up to reality: http://www.usatoday.com/news/nation/2008-01-29-illegal-immigrants-licenses_N.htm
 do not have enough military funding: http://www.nationalpost.com/news/story.html?id=272344
 study: http://www.washingtonpost.com/wp-dyn/content/article/2008/01/29/AR2008012902908.html
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