To get a rough quantitative estimate of the implications for the unemployment rate, suppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred and—I assume—the share of long-term unemployment had equaled the peak value of 24.5% observed in July 1983. Then, if the number of unemployed 26 weeks or less in June 2010 had still equaled the observed value of 7.9 million, the total number of unemployed would have been 10.4 million rather than 14.6 million. If the labor force still equaled the observed value (153.7 million), the unemployment rate would have been 6.8% rather than 9.5%.Yeah, consider how better off Obama would be if he was claiming, right now, that the number of people on long-term unemployment never would have exceeded 24.5% and therefore the unemployment rate can't be higher than 7%.
Consider how the prospects for Democrats in the November elections would look if the unemployment rate were now only 6.8%. Obviously, this change would make all the difference, and President Obama can reasonably blame his economic advisers. They should have protected their boss by standing firm and arguing that a reckless expansion of unemployment-insurance coverage to 99 weeks was unwise economically and politically. Congressman Boehner's advice to Mr. Obama seems correct, though possibly too late to matter.
In other words, all the folks currently between 26 and 99 weeks of unemployment would either A) vanish from the labor force and not be counted as unemployed making the unemployment rate 6.8% or B) magically would have found jobs from the Magic Employment Fairy.
No really, this is coming from a famous Harvard economist. It's awesome.
Wait'll Krugman finds out. It'll be like 300, only with aggregate demand.
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