Work Share Programs

States are following Germany's example and instituting programs where employers can reduce employees' work hours instead of laying off full time workers and the government will subsidize their pay to make up for hours lost. See the story here.

This seems like huge obstacle for the economy to ration resources efficiently. That is, most funding will go to those businesses with a long list of possible layoffs, which signals one of two things: either the business itself is doing poorly on its own account or the industry it is in is doing poorly. Government funding for work sharing is a way to prop up weak businesses or sectors such that resources aren't naturally being sought for their most valued use. Employees, equipment and materials may have higher value elsewhere but reallocation by the market is prevented by false signals created by government intervention.

Some argue that this type of program is good because it allows people to maintain human capital, or working skill and knowledge. I don't buy that though because it assumes that those being laid off cannot maintain skill/knowledge, won't find work elsewhere or won't use it to benefit themselves and other through entrepreneurial activities. Even if unemployment is already high, market incentives should drive actors to find the highest valued use of their skills.

Reaction to new Unemployment Numbers

Paul Krugman:

“Today the unemployment rate passed 10 percent, a sort of brutal milestone The thing to do, I guess, is to keep making the case for doing more; in particular, we can hope that centrist Democrats will finally realize that timid economic policies are hurting their own electoral prospects. But it’s an uphill fight.”

So let's keep doing the more of the same because it isn't working yet? Sounds like a good strategy.

Unemployment and our sense of entitlement

From CNN.com:

Another day, another 7,000 people run out of unemployment benefits.

One month after the House passed a bill extending unemployment benefits, the issue is still being debated in the Senate.

Democratic leaders in the Senate introduced a bill two weeks ago to lengthen benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% would receive an additional six weeks.

Senate Republicans, who twice objected to swift passage of the bill by unanimous consent, want to add several amendments. Their requests include paying for the increased benefits with stimulus funds rather than by extending a longstanding federal unemployment tax through June 2011.

While leaders in both parties are trying to negotiate a compromise, Senate Democrats Wednesday evening took a step to limit the debate on the bill and bring it to the floor as early as the end of next week. If it passes, the Senate legislation must then be reconciled with the House version, which extends benefits by 13 weeks for those living in high-unemployment states.

Meanwhile, the bickering has cost people like Crystal Jordan of Dolton, Ill., their benefits. The single mother of three ran out in late September.

She is one of the 1.3 million people set to lose their benefits before year's end if Congress doesn't act, according to the National Employment Law Project, an advocacy group. In October alone, more than 200,000 people will fall off the rolls

The bickering isn't costing them THEIR benefits as they will already use up the benefits already allocated to them. How can you own something that doesn't belong to you but has to be coerced from taxpayers?

Anti-trust on IBM

The Justice Department is investigating whether IBM abused its "monopoly" position in mainframe computing. The complaint comes not from consumers in the sector but the Computer and Communications Industry Association, which is a trade group that Microsoft and Oracle belong to. Anti-trust action is meant to protect consumers from monopoly prices in theory, but it isn't ever the consumers that complain. It's the company's main competitors. Microsoft knows well how the game works.

Bill to subsidize hiring

From the NY Times:

...[T]he policy is intended to encourage companies to start hiring again by making it cheaper to add new workers.

Here's an idea, get rid of minimum wage laws. Legislation to cover other bad legislation. Americans lose, except the politicians of course, who gain the vote of the unemployed and inexperienced workforce.

But looking at it as a payroll tax cut, I support it.

David Brooks on the New Culture War

David Brooks argues that it is time for Americans to re-embrace the principles of economic self-restraint, hard work and focus on production rather than consumption. I agree that living within your means is wise and avoids many problems at a personal as well as national level. But what about the claim about becoming a production economy rather than a consumption economy?

Does he mean that we should specialize in durable goods or resources? It's not as if the economy doesn't produce anything- we lead in services, innovation and ideas. This hints of protectionism, but I could be wrong.

I'm not sure how he hopes to convince the public, but he does bring up the fact that people were more prudent when there was no social safety net. He doesn't mention limiting the welfare state, but in my humble opinion, people respond more to incentives than they respond to preaching.

Reid fights for Nevada

From the NY Times:

The Senate majority leader, Harry Reid of Nevada, has secured a special deal protecting his state against the costs of expanding Medicaid under one of the major health care bills moving through Congress.

Mr. Reid, a Democrat, complained about the impact on Nevada when the chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, unveiled his bill on Sept. 16.

Now Mr. Baucus has modified the bill to spare Nevada and three other states, and Mr. Reid, who faces a potentially difficult race for re-election next year, is taking credit for getting a “major increase” in federal money for his state.

Another example of wanting the benefits, not for the constituents per se, but for self interested reasons and wanting someone else to pay for it.

Under Mr. Baucus’s original proposal, the federal government would have paid 87 percent of the new costs in Nevada. Under the modified version, the federal government would pay 100 percent of the new costs for the first five years. Severe financial problems have prompted Nevada and other states to cut spending and furlough workers, and some states have even considered releasing prison inmates to save money[...]

[...] Mr. Baucus revised his bill to give extra help to certain “high-need states.” The states were not named in the bill. But only four states meet the criteria: Michigan, Nevada, Oregon and Rhode Island.

The changes came at the expense of other states, including California, Florida and Illinois, which would see significant increases in state Medicaid spending under the new formula[...]

[...]Many states worry that the expansion of Medicaid could saddle them with long-term financial obligations.

Representative Nathan Deal of Georgia, the senior Republican on the House Energy and Commerce Subcommittee on Health, said Mr. Reid “appeared to be playing politics to favor Nevada over other states.”

“Senator Reid should know that this legislation is not only bad for Nevada, but it is bad for the rest of the United States,” Mr. Deal said.

James P. Manley, a spokesman for Mr. Reid, brushed aside the criticism.

“Senator Reid makes no apologies for fighting for federal money for his constituents,” Mr. Manley said. “Under Republican governors, Nevada has consistently underfunded programs such as Medicaid.”

In other words, he's not shy about taking from others to benefit his voters so he can remain in the Senate. It's always productive to make it a partisan issue as well (yeah right). The fact is, our representatives in Congress think they know what is best for us, but don't want to face the reality that there's *say it with me* no such thing as a free lunch.