Quoted in two articles in the Daily Item

Quoted here and here

The Daily Item, Sunbury, PA


November 30, 2010

Worker has request for Santa: a job


133,000 Pennsylvanians to lose aid as federal programs expire

By Evamarie Socha

The Daily Item



— SHAMOKIN — The only hunting David Bidding was doing Monday was job hunting, the Shamokin man said with a slight laugh while filling out paperwork at the Northumberland County CareerLink office.



Smart move: About 133,000 Pennsylvanians will be cut off prematurely from supplemental unemployment benefits in December after federally funded programs run out today, based on U.S. Labor Department data from the National Employment Law Project.



Federal benefits run up to 53 weeks and begin after state unemployment compensation ends, usually at 26 weeks.



After December and the initial cut, more than 1 million more people per month will fall off the rolls. By April, unless the employment picture improves, 6 million workers will be without federal benefits.



"These are people who will see their unemployment end ... where it wouldn't have if Congress had acted" to extend the benefits, said George Wentworth, senior staff attorney with the employment law project, based in New York.



Meanwhile, U.S. Sen. Bob Casey, D-Pa., announced Monday that he will hold a conference call today to discuss the need to preserve unemployment insurance as well as tax cuts.



"Without action, unemployment benefits for workers who lost their jobs through no fault of their own will begin to expire," Casey said in a statement. His office estimates about 83,000 Pennsylvanians would be left "without vital support to help them keep food on the table and pay their bills next month."



The U.S. House of Representatives failed to pass a $12.5 billion bill Nov. 18, after a vote of 258-154 fell short of the needed two-thirds approval. This means about 2 million people nationwide will lose their benefits after today.



The news that federal unemployment benefits likely will end today wasn't what Bidding wanted to hear.



"At this point, anything is a hit," said the 36-year-old who has been out of work for about two years since losing his job when Fleetwood Motor Homes left Paxinos in December 2008.



The national unemployment rate is near 10 percent, according to the Labor Department.



The federal Emergency Unemployment Compensation program began in July 2008, adding 13 more weeks of benefits to those out of work whose state benefits ran out. At the time, unemployment nationwide was about 6 percent.



As the recession deepened and the national unemployment rate kept rising, Congress passed legislation several times to increase the number of weeks for benefits.



Wentworth said that because of how the law works, the phase-out is graduated in two categories:



n"‰Workers who are exhausting their 26 weeks of state benefits. They will not get federal help at all. "People who got their last regular state check last week don't have a program to go on to if Congress doesn't reauthorize the law," Wentworth said.



n For those on federal extensions, there is a four-tier system that potentially could carry them for 53 weeks. Under the law, these people will "collect the balance of whatever entitlement tier they're on" and that is that, he said.



For instance, someone on the first tier is eligible for 20 weeks of benefits. If that person is on week 10 of 20, he'd get 10 more weeks of benefits and then be cut off, Wentworth said.



The extended benefits program in Pennsylvania also will end, Wentworth said, and that will be a hard stop. Basically, the state will stop that program after the last check is cut Saturday.



Thirty-five states operate the extended benefits program, which gives an additional 13 to 20 weeks of unemployment compensation beyond the EUC program. Extended benefits are normally funded half by the federal government and half by the state.



Under the Recovery Act, Congress authorized full federal funding of the extended benefits program, but when that authority expires today, most states will stop operating it.



Wentworth said that according to his group's projections, come today, 22,000 people in Pennsylvania will exhaust their benefits. In December, another 58,000 will be in that spot.



How it came to this has been a politically contentious issue about paying for the program, which cost about $5 billion per month, Wentworth said.



"But historically, whenever national unemployment has been high, Congress has enacted these additional federal benefits," doing so eight times since the 1950s, he said.



"They've always done it as emergency spending, which means they didn't look to have corresponding offsets in the budget; the idea is you have an economic emergency and it's a stimulus. You want to get money into the economy to mute the impact of the stimulus funding. That seems to be what the debate is about now."



But there may be a better employment outlook ahead, said Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove. He feels in the next six months to a year, the unemployment rate should drop some.



"Firms have money to spend," he said. "A lot of the reason businesses weren't hiring was the uncertainly about what new laws are passed," such as the health care bill and tax cuts and how those would affect business.



Rousu said that with the Republicans holding the majority in Congress, fewer things will be passed. "It's the sweeping legislation where people don't know what's in it (that scares business)," he said. "I expect we'll see much less of that."



The debate, however, doesn't matter much to Bidding, who said he's interested in any kind of work available to him now.



"When you go from lower from what you were getting to making nothing, what are you supposed to do?" he asked.






November 30, 2010


National debt is big concern, prof says

By Evamarie Socha

The Daily Item



— How long is too long to collect unemployment benefits?



That seems to be the question surrounding the latest debate over extending unemployment compensation. Although Congress has prolonged the aid four times in the past year — most recently in July at $34 billion — paying these benefits has become an ethics issue as well as a political one.



"It's kind of the same argument as last time: the benefits and the drawbacks" to extending the benefits, Matt Rousu, associate professor of economics at Susquehanna University, Selinsgrove, said Monday.



"Reasons you would oppose the extension are you think it gives bad incentives, that people wouldn't look as hard for jobs," he said. "The other is the cost. If we do this, it adds to our debts. We're at a time in this country where everyone seems much more concerned for national debt."



The drawbacks, Rousu said, are that a family who loses the funding also won't have as much money, and therefore will have fewer purchasing opportunities, so the economy is not stimulated.



Congress' timing in ending the funding surprises George Wentworth, senior staff attorney with the National Employment Law Project, an employment advocacy group in New York.



"Congress has had eight programs in 50 years and has never cut one of these when unemployment was this high," he said, noting it cut funding once before when unemployment was at 7.2 percent in 1985.



But unemployment wasn't as long then, either. Long-term unemployment today averages 27 weeks, a record, Wentworth said. More than 42 percent of the unemployed have been jobless more than six months, and close to 23 percent have been out of work a year or more.

Radio Interview

I was a guest on the "On the Mark" radio show today.

You can hear the interview at http://www.wkok.com/roundtable/OTMThursday.mp3.  This link will have my interview until 11/11/2010.  I have an MP3 of the file if you want it after this date (send me an email).

My plea to the uninformed ...

If you are not informed on the issues and don’t know what the candidates stand for, please DO NOT go vote today. Some people will try to make you feel guilty for not voting. Not me. I think all educated voters should thank those who are uninformed yet make the responsible choice of not voting.


Thanks!

I will be on "On the Mark" Thursday

I will be on the "On the Mark" show on WKOK radio Thursday morning at about 9:15 AM.

We are slated to discuss the election, the economy, and my poker adventures this summer.

You can listen here.

Story on lawyers

Here is an interesting story on lawyers. Law schools are churning out so many that there is a glut in supply.

This raises an interesting question: Are additional lawyers adding or decreasing to the value of society? Certainly some minimum number of lawyers is necessary to help keep the rule of law in our country. However, we seem to be well beyond that point in the US. Additional lawyers can detract from the value of society by being too litigious - increasing costs to the rest of society because of increased prices for products (because higher insurance prices are passed to consumers). On the extreme, professions that add little value to society are professional gamblers, lobbyists, and political consultants. There is nothing these folks do to add to society based on their profession: they take money from other gamblers, spend their time trying to get laws passed that helps their constituents, or try to get their candidate elected (likely battling a political consultant of an opposing candidate).

The most disturbing line in the story to me is here: "That has caused some concern among lawyers who think the accrediting organization, the American Bar Association, is doing the profession a disservice by approving so many new schools. (Contrast that with medical schools. They come with much higher startup costs and tend not to be money-makers. Relatively few students get medical degrees every year, and demand far outstrips supply.)"

Doctors do add value to society. In addition to their earning a large income, they help people daily by providing medical care. Most jobs add value to society - construction workers, teachers, fast food workers, etc. all make others better off while simultaneously earning incomes. Personally, it is discouraging when I see so many incoming freshman indicate they want to go to law school.

I would be curious to see an index of the social value of various professions - but I am not sure one exists.

Marcellus Shale Debate

Here are a couple links - here is another





The PA state house just passed a bill mandating a tax on drilling. There are some who think drilling for gas in Marcellus Shale indicates the end of the world as we know it. While others want this industry completely left alone.



This is an interesting issue from an economist's point of view. The issue with drilling in Marcellus Shale with gas have both the political left and the political right using economic logic to support their views. Sometimes - both groups use economic logic correctly, which is quite rare.





How the left might use economic logic to defend their point: "Drilling for gas in Marcellus shale potentially creates externalities. With unknown pollution effects, if something goes wrong everybody is going to have to pay (in terms of dirty water or other contamination) for the oil companies drilling. Therefore, this drilling should be taxed to correctly account for the externality."





This is a perfectly sound argument. Those (who are farther on the left) who call for a ban are not using sound economic logic unless they think the damages are so horrifically bad that there is no way a price could be put on them. This is unlikely.






How the right might use economic logic to defend their point: "Drilling for Marcellus Shale accomplishes two great things for our state and country simultaneous: it provides jobs and it reduces or dependence on foreign energy sources. We absolutely need this drilling now, during a recession, to provide jobs to our region."





Again, this is a perfectly sound argument. Those (who are farther on the right) who call for no taxes, however, don't have as strong of an economic argument. Some claim that it will kill the industry, but given other states impose taxes on gas extraction, this won't happen unless taxes are too large.

To call for no taxes means you should have one of two positions: The first would say there is no potential for a negative externality (side-effect). To argue for no taxes, you would have to be supremely confident that no spills would happen that would damage the environment (which would be pretty silly given recent history). The second potential argument for no taxes is thinking of it like an economic stimulus. Lower taxes during a recession can help spur growth -but since the state of PA must (by law) have a balanced budget - more taxes here means lower taxes elsewhere, so this type of tax decrease would have to be offset by a tax increase elsewhere. Hence, this second argument isn't sound.



Most economists would agree that there should be drilling with a tax in place. The amount of the tax is of tremendous importance - too much would essentially ban drilling, and too little wouldn't compensate for the negative externalities.

The state senate now takes up the matter - where the size of the tax will be a crucial issue.

Cash for Clunkers revisited

By Jeff Jacoby in the Boston Globe

We discussed here why this policy was so horrible last year. We should not forget how skilled our government can be at making policies that are backwards and have unintended consequences.

Cash for Clunkers has helped lead to an increase in the price of a used car. From the article:

"... the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine ..."