A few days prior, Congressman Jim McDermott, a Democrat representing Washington, proposed a bill, which, if passed, would extend unemployment benefits for an additional 13 weeks. The states affected would include those with unemployment rates above 8.5% - this includes California and 26 other states.
So far, Congress has passed 53 weeks of unemployment benefits and is being exhausted of federal funds. The current national unemployment rate is about 9.7% and is expected to soar over 10% as early as 2010; all federal funds for unemployment benefits are expected to be exhausted by 2011.
When one is not affected by unemployment, he or she criticizes unemployment insurance, but the unemployed (many who have been unable to find jobs for over a year), and their families, have faced drastic changes in their lives.
Last year, a mother was laid off from her job and started receiving unemployment benefits, which lasted for a few months to help the family during this harsh period, in which she was to find a new job. The family relied on her unemployment and Social Security checks and her husband's job to run the family. Several months later, the family received news that the husband was being laid off and would have a few months of unemployment benefits from the company in order to have time to find a new job. That was in January of 2009. It is now September of 2009 and he is still unable to find a job; in all the interviews he's been to, he's received one of two responses: "You are over qualified for this position" or "We cannot offer you the same salary as you used to receive." Both responses in a way say he is getting older and the company is looking for younger, more energetic employees, or they are scared he will receive a higher position and the interviewer him/herself will lose their job. Before the economic recession, the family moved to a new house so their son could receive an education at a school such as Aragon High School. Also, they bought 2 new cars; a van and a hybrid. The family has started to tap into their son's college savings in order to run the house and pay their taxes. Their Social Security checks has run out and their unemployment benefits end at the end of September.
300,000 people are in the same position of this family; on the verge of losing their home. If the new bill is passed, they will receive an extra 13 weeks of grace period to find a new job.
The economy needs people to spend money in order to flow. Personally, I believe the problem today is people are scared; they don't want to spend money in risk of losing all their savings, and eventually, their homes. It's like a positive feedback loop: people don't spend; companies lose money; people make less money; people save money and don't spend; companies lose money and have to let go of workers; those workers save their money and don't spend. And the whole economy spirals down until we return to the Great Depression and hope the war boosts our economy. Knock on wood.
Armaan Vachani
[Edit: link to the original article is embedded in the title.]
Monday, September 21, 2009
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10 comments:
I'm not sure, but I think that was Bush's plan. Bush tried to use the war effort as a way to stimulate economy but it ultimately failed. Why? Because the general public isn't as involved in the war effort. During WWII, car companies started building tanks, and clothing companies started making uniforms. EVERYONE was involved in the war effort and jobs were available to help the army. Today, people have been putting the war in the back burner. Not to say that these wars are unimportant, but people just aren't as involved in the war effort now as they were during WWII.
It is really sad to see so many unemployed people. Obama's plan is a great attempt at stimulating the economy, but it's just not enough.
I highly doubt that Bush 2 was trying to use the Iraq War as a stimulus on the economy. One, it was never an officially declared war, just a prolonged military operation. And two, the scale is way off; if he really wanted to have a war large enough to stimulate the economy through an armed conflict, we probably would have left those missiles in Turkey, to piss off the Russians.
Armaan, I absolutely agree with your assessment of the psychology of the Recession. I was reminded of a story I heard on This American Life about the economy when it was first starting to go sour. They had interviewed a salesperson who remarked on the sharp decline in sales, even though it was the Holiday (Yay political correctness!) season, among people who still had jobs. This fact baffled the woman as well as me as even people who were still employed and may even have had a low risk of losing their job were in the mindset that they had to save and not spend; crippling our capitalistic economy. I would have to say that I subscribe to the Keynesian school of thought:we need spending, and spending needs stimulus money.
Joe, if I'm not mistaken, Russia fell apart in during 1991-1992. I believe that's when the Cold War "ended." If I'm wrong, you're welcome to correct me. As with the war now, I'm not just talking about the Iraq War, but all of the wars including in Kuwait, Afghanistan, and other middle eastern wars (like the Palestinians). I'm trying to find the article where I found this evidence, but I'm failing at this...
Armaan, i totally agree with your analysis on the positive feedback loop. This reminds me of the snowball effect in economics when money is needed to stimulate the economy since if everyone is saving up money because they are being safe or are unemployed, the whole economy will gradually go to a downfall because more people will get laid off due to the lack of money companies are able to pay their employees.
Yep. As people are wiling to work for less and job opportunities with even a decent income are almost nonexistent, America's economics is going to plummet. The worst part is that this reminds me somewhat of some research I did on sweatshops. Third world countries' citizens have to lower their expectations and income so much to even have a chance at the job market. Do you think at this point this will occur?
Also.. the thing about the war is that the American government now has over 9 trillion debt in which I am pretty sure the government will find it hard to replenish in order to properly stimulate the economy again. But then again maybe my knowledge is insufficient.
Does anyone know if before the Great Depression...was the government in a money crisis? If not.. couldn't this mean bad things for us? It seems like all the government funds are going to helping people maintain their jobless lives more than create more occupations. Should the government change this? (we really don't need anymore highways, bridges or anything of that sort: so what kind of jobs could the government make available?
Yoda, the United Soviet Socialist Republic collapsed in the early nineties. There is now a country just called Russia.
As we already have an excessively large military industrial complex, economic stimulation through war would be largely ineffective. This would lead to the conclusion that there are other, such as building a neo-imperialist oil empire and lingering containment policy, motives behind the conflicts in the Middle East.
Mr. Silton brought it up today and mentioned that the economy is said to be getting better and there is a light lag in the labor area. Companies need to start making more sales (which they are doing now) before they are able to employ new employees. This surge in employment won't be expected to be noticed until, maybe, 2010-2011.
Yoda: The current war, as Joe stated, wasn't actually declared; it was under the radar and wasn't really publicly known, or criticized if people did know, until the first attack on US soil since Pearl Harbor, 9/11/2001.
Lily: Wow, thanks for bringing that to my attention. I didn't realize in how much of a debt the government is. I haven't been keeping up with it.
Goldie: I believe its the same concept, just with different names and different ways to describe/explain it, but yeah, basically the same.
"As we already have an excessively large military industrial complex, economic stimulation through war would be largely ineffective."
This is what I hate about arriving late to a topic. The good arguments have been tapped.
"This fact baffled the woman as well as me as even people who were still employed and may even have had a low risk of losing their job were in the mindset that they had to save and not spend; crippling our capitalistic economy."
Although I agree that spending gets us out of this mess, that's not how people think.
It's sort of like prisoner's dilemma, mutual benefit (in this context, getting us out of the recession) comes when everyone pitches in their money, but not everyone will. So those people who don't spend will be the winners, while the people who spent their money would be in a worse position than before.
It's about self-interest vs. mutual benefit.
http://en.wikipedia.org/wiki/Prisoner%27s_Dilemma
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