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Friday, November 26, 2010

Republicans don't understand basic economics or basic facts

The GOP want to stop extending unemployment benefits which will cost $12,5 billion but want to extend tax cuts for the richest Americans which will cost about $70 billion a year.

Newt Gingrich recently made a fool of himself when he claimed he couldn't understand tehe stimulative effect of unemployment or food stamps. It's been calculated that $1 of food stamps generate about $1.80 of economic activity while unemployment benefits create $1.61 of economic activity for every dollar. Gingrich questioned the logic behind this voodoo math. It's really quite simple. food stamps and unemployment are spent within 30 days. In the case of food stamps the groceries buy the food from producers who receive income from that and spend some of that income to buy the ingredients and the packaging for the food. easy to understand for anyone using that simple logic which is either beyond Gingrich's grasp or he knows it but refuses to believe it. Unemployment money is also put back into the economy in a hsort period of time for a variety of reasons.

About 2.5 million people could see their unemployment benefits ended in the next month unless Repubicans change their minds. That will, ironically create more unemployment.

Tax cuts for the rich will put anywhere from 10-40 cents of each dollar back into the economy. Neil Cavuto, the so called Fox News economist took issue with that earlier this week when Democratic strategist Chris Hahn said that tax cuts for the rich would generate about 30 cents per dollar on average. Cavuto immediately accused Hahn of making up that number. Not true. The CBO and all serious economists without an ideological axe to grind agree with that.

To quote Upton Sinclair yet again, "It is difficult to get a man to understand something when his salary depends upon his not understanding it." Not understanding has become rampant by the right and the result is and will be a policy based on not understanding basic economics. If, or more likely when the economy stalls and unemployment stays at the same level or rises they will continue to 'not understand' but will understand that their job is to blame Obama.

1 comment:

Anonymous said...

That completely makes no sense. you cannot generate 80% return in that model because it does not take into account what the producer spent. At best you could get 1 for 1.