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Not Extending Unemployment Benefits Would HURT Economy

WASHINGTON — If Congress lets unemployment benefits expire this week for the long-term unemployed, they won't be the only ones to feel the pain. The overall economy would suffer, too. Unemployment benefits help drive the economy because the jobless tend to spend every dollar they get, pumping cash into businesses. A cut-off of aid for millions of people unemployed for more than six months could squeeze a fragile economy, analysts say. Among the consequences they envision over the next year: _ Annual economic growth could fall by one half to nearly 1 percentage point. _ Up to 1 million more people could lose their jobs. _ Hundreds of thousands would fall into poverty. “Look for homelessness to rise and food lines to get longer as we approach Christmas if the situation can't be resolved,” says Diane Swonk, chief economist at Mesirow Financial. The issue is expected to be taken up in the lame-duck session of Congress that resumed Monday. Among other unfinished business, lawmakers are likely to vote on whether to extend 2001 and 2003 tax cuts that are set to expire at year's end. … That money ripples through the economy, into supermarkets, gasoline stations, utilities, convenience stores. That allows those businesses to hire more people, who, in turn, spend more money. … By contrast, money given to higher-income families – say, through tax cuts – tends to deliver less economic benefit because those taxpayers typically save a big chunk of their windfall. added by: tverdell

NY Times Op-Ed Writer’s Muddled Logic: Money Not Paid in Taxes a Gift from Government

It’s a really skewed view of the relationship between citizens and the government – that anything you earn and get to keep by not paying to the government in the form of taxes is a show of benevolence from the government. But that’s apparently the view of Richard H. Thaler, professor at the University of Chicago . In the Sept. 26 New York Times , Thaler, declares that tax cuts are a gift in his op-ed “What the Rich Don’t Need.” “WANT to give affluent households a present worth $700 billion over the next decade?” Thaler wrote. “In a period of high unemployment and fiscal austerity, this idea may seem laughable. Amazingly, though, it is getting traction in Washington . I am referring, of course, to the current debate about whether to extend all, or just some, of the tax cuts of President George W. Bush – cuts that are due to expire at year-end. They’re expiring because the only way they could be enacted initially was by pretending that they were temporary.” Video Below Fold This caught the eye of CNBC’s Joe Kernen, the co-host of “Squawk Box.” On the Sept. 27 broadcast of his show, Kernen pointed out the flaw in that logic. “Over the weekend, I was reading in The New York Times – it was one of their professors that writes. I forget the guy’s name. I always disagree with him,” Kernen said. “[H]e talks about it as a $700-billion gift to the rich. And I just have a problem when they look at – OK, so they’re using the Clinton tax levels as the standard of where we are. And anything diverges from that is a gift, even though it’s money you earned. It’s a gift back to you.” Kernen questioned why the talking point used by tax cut opponents is always based on what tax levels were during the Clinton presidency and why it is a view that a certain percentage of what taxpayers keep is gift to the them. “Let’s go back to pre-, before Reagan began was around, when it was 70 percent. Anything less than 70 percent, is it a gift to the taxpayer?” he continued. “[D]oes it start at ‘you pay 100 percent to us and anything we let you keep after that is a gift’ or does it start at ‘0 percent and anything you charge me prove that you need to spend that.’ Why don’t you do it that way? Prove that you need anything above zero percent. Show me you’re not going to waste it and then prove you can do it.” Fill-in co-host Michelle Caruso-Cabrera, author of the forthcoming book “You Know I’m Right: More Prosperity, Less Government” summed it up succinctly by explaining what the intended relationship of government and the citizens is. “They work for us,” Caruso-Cabrera said. “We don’t work for them.”

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NY Times Op-Ed Writer’s Muddled Logic: Money Not Paid in Taxes a Gift from Government