weekend commentary - Your EBT Card has been Denied !
from
(snip)"While virtually everyone has opined on the topic of the massive fiscal "cliff" set to take place on January 1, 2013, which could crush US GDP unless American politicians manage to find a way to end their acrimonious ways, most forget that a far more tangible cliff is set to take place much sooner, specifically over the next several months, as those currently collecting handouts from the government in the form of extended unemployment benefits (i.e., those who have been out of a job for a year) are about to get as angry as Germants pre-funding TARGET3, once the free money stops. Goldman explains why:
"First, more than 150,000 workers per month exhaust their allowed benefits.
Second, recently legislated thresholds will reduce benefit eligibility in many states with below-average unemployment rates beginning in June.
Third, apart from legislative changes, labor market improvement in some states has taken the state-level unemployment rate below eligibility thresholds, with many states looking at likely expiration of one or more tiers of benefits around mid-year."
In other words, unlike the bulk of other transfer payment programs (read government subsides) which could be extended with the flick of a switch at the end of the year following the now traditional 1+ month congressional theatrical impasse, extended claims can not. The net result: by June some 700,000 people who are currently collecting benefits will lose everything. It seems that the old faithful EBT card is about to be denied"(snip)
(snip)"Goldman explains the reasons for this dramatic cliff:
Over the next several months, eligibility for federally funded jobless benefits will decline. This is due in part to legislative changes over the last few months, and in part to broader economic factors. In particular, there are three factors likely to contribute to reduced benefit eligibility and increased exhaustion of benefits over the coming year:
1."Natural" exhaustion of emergency and extended benefits. The rate of benefit exhaustion has declined somewhat over the last year, but remains between 150,000 and 200,000 individuals per month on a three-month average basis, as shown in the first chart below. To estimate this, we consider "final payments" reported each month by the Department of Labor in the final two tiers of the Emergency Unemployment Compensation (EUC) program and in the Extended Benefits (EB) program, net of first payments in other benefit tiers that might feed into those programs (for instance, a worker who exhausts Tier 3 will receive a final payment from Tier 3 and a first payment from Tier 4).
2.The most recent legislative extension will soon phase out emergency benefits in states with lower unemployment rates. When Congress extended emergency benefits in February, the thresholds for states to qualify for more generous "tiers" of benefits were made more restrictive, as shown in the table below. Those changes begin to take effect in June.
3.EB and EUC have started to expire in some states, and will expire soon in most others. Federally funded extended benefits (EB) provide up to 20 weeks of benefits, generally after EUC has been exhausted. A state generally becomes eligible for these benefits when its unemployment rate is at least 6.5 percent and the three-month average unemployment rate is at least 10 percent greater than it was during the same three-month period in any of the previous two years. In late 2010, Congress extended this two year "look-back" period to three years, in order to avoid cutting off benefits in 2011. However, in the most recent extension passed by Congress in February, Congress did not extend the look-back period any further. With the national unemployment rate roughly equal to the rate in Q1 2009, few if any states will have unemployment rates at least 10 percent higher than in the comparable period in any of the last three years, and extended benefits will end in nearly every state. Some states have also lost eligibility for the third and fourth tier of EUC due to declining unemployment rates that have now fallen below the thresholds even before taking account of the recently legislated changes. In Q1, Tier 4 eligibility ended in four states, and it ends in an additional five states this month. Assuming that state unemployment rates hold roughly steady, it appears that this final tier of benefits will be available in only 11 states by Q4. We estimate Tier 3 benefits will be available in just over half the states in Q4.
The upshot is that by around August roughly 700,000 jobless workers will no longer qualify for benefits who would have otherwise qualified. The chart above shows the difference between the number of individuals who would receive benefits each month based on current policy compared with our projection of eligibility based on state-level unemployment rates.
And the consequences:
1.Reduction in income. Based on the cumulative reduction in benefit eligibility shown in the chart above, we estimate weekly benefits would be cut by a cumulative $6 billion over the course of the year.
2.Possible effect on initial claims. The possibility has been raised that expiration of benefit tiers has led to increased filings of initial claims, either in response to expiration or in a mistaken attempt to establish eligibility ahead of expiration (expansion of benefits in 2001 increased claims, for instance, though there have been no clear signs of this in the data over the last few years). To investigate this, we estimate a panel regression using the percentage change in each state's weekly claims rate from its four week average change and dummy variables for changes in each state's eligibility for Tier 3, Tier 4, and EB. The difficulty with the analysis is that before the last few weeks, very few states had lost eligibility for these programs. That said, we find that a state's loss of EB eligibility increases claims by 7% in the week following expiration. This implies a very small effect--less than 1,000 claims--on the claims data for the week ending April 14 (nine states went off of EB eligibility at the end of the prior week). If correct, it implies that upcoming expirations could have a slightly more important effect; another six states will come off EB benefits the week ending April 28, which could add a few thousand claims to that week's report. Since these should be short-lived effects, we do not see benefit expirations as a reason to expect high levels of claims, but it seems possible that expirations could add even more noise to weekly claims data.
3.Slight reduction in labor participation rate. Emergency and extended benefit programs paid benefits to 3.2 million unemployed workers at the end of March. As noted above, labor market improvement combined with recently legislated changes should result in a cumulative reduction of 700,000 workers collecting benefits through 2012. As Andrew Tilton noted a few months ago, extended benefits tend to increase the measured unemployment rate, through a combination of increased reported labor force participation and lower intensity of job search (see "The November Employment Report, and the Impact of Extended Jobless Benefits on the Unemployment Rate," US Daily, December 2, 2011). Averaging the effects of extended benefits on the unemployment rate reported in other studies implies that emergency benefits might add about 0.4 percentage point to the unemployment rate, mostly due to increased labor force participation. Since these exhaustions would reduce the number of individuals claiming benefits by around 20%, the effect would probably be worth only about 0.1 percentage point on the unemployment rate.
In other words: lower spending, more claims, but at least Obama's dream of showing a lower, or even negative (yes, it is absolutely possible if the participation rate drops below 58%) unemployment rate will come true. (snip)
(snip)Finally, from the conclusion:
At the end of 2012, benefits are scheduled under current law to expire altogether. Unlike previous scheduled expiration, where individuals would lose eligibility for benefits only after they exhausted their current "tier," the current policy would cease paying benefits at the end of the year with no phase-down). Our current assumption is that benefits will expire altogether at that point; this could occur because of an agreement between the parties to allow them to expire, but like other policies set to expire (the so-called "fiscal cliff"), benefits could also cease because Congress fails to agree on any of the fiscal choices it faces at the end of the year. An additional phase-down of benefits rather than outright extension is certainly possible as an alternative scenario.(snip)
The somewhat ironic take-away from this 'story' is this. Gov't sanctioned manipulation of the official unemployment rate, from seasonal adjustments to the birth-death model to 'not in the labor force' reclassifications, has now resulted in an official unemployment rate that is no longer considered to be at 'emergency' levels in an increasing number of US states. As such, 'emergency' federal extended unemployment benefits funding for unemployed residents in those states will soon no longer be authorized !!! This means the end of unemployment checks for residents of states with lower official unemployment rates who remain unemployed longer than the 20-26-whatever week limit that is authorized under their state law.
Re: weekend commentary - Your EBT Card has been Denied !
Which in turn means by the 3rd (election) and 4th quarters the unemployment numbers will look great! The reality will be vastly different. There will be more bankruptcies and foreclosures. With prices of gas and food going up at the same time.
Even people with a job and some money arent spending much. They dont have job security so they hang on to what they have.
They cant cook the numbers forever though. Like Greece and now Spain, eventually we wont be able to ignore it when the economy comes grinding to a halt.
Re: weekend commentary - Your EBT Card has been Denied !
Quote:
Which in turn means by the 3rd (election) and 4th quarters the unemployment numbers will look great! The reality will be vastly different.
Skirting the edge of the 'politics ban', let me make this careful comment. 'Reality' doesn't actually matter much to those Americans who are 'insulated' from experiencing negative personal effects of that 'reality' ... i.e. long term welfare / food stamps / medicaid recipients, unionized gov't workers, workers in private sector industries that are 'subsidized' by / 'protected' by / in de facto partnership with the gov't, gov't subsidized college students and educational professionals, gov't subsidized health care institutions and health care professionals, gov't subsidized financial institutions and financial professionals, etc. It remains to be seen whether the number of Americans who are thus 'insulated' from economic 'reality' now outnumbers the number of Americans who are not !!!
Also, when the long term unemployed ... who have been 'sustained' via 99-112 weeks worth of 'emergency' unemployment benefits checks, plus food stamp and medicaid benefits ( in certain situations ) ... abruptly find that those unemployment benefits checks have stopped, they arguably face a dilemma. One choice is to do whatever is necessary to obtain a job - which may involve relocating to another state, performing work that they consider to be unpleasant etc. Another choice is to maintain their eligibility for food stamps and medicaid benefits, and 'replace' their lost unemployment benefits with social welfare benefits that don't have a time limit.
Quote:
They cant cook the numbers forever though. Like Greece and now Spain, eventually we wont be able to ignore it when the economy comes grinding to a halt
Well, to be technically correct, the portion of the economy that comes grinding to a halt is primarily that portion which had been financed by gov't deficit spending. Of course, when a gov't actually reaches the point of being unable to continue borrowing at 'manageable' interest rates in order to continue subsidizing a major fraction of its citizens / economy, thus must abruptly reduce those gov't subsidies, the formerly subsidized citizens typically reach for their 'pitchforks' and take to the streets !
Re: weekend commentary - Your EBT Card has been Denied !
Painful as this may be, it's more likely to result in private citizens picking up the slack, as they've been doing.
Re: weekend commentary - Your EBT Card has been Denied !
^^^^ ummm, no ! From
http://www.investors.com/image/WEBdis0420.345.gif.cms
^^^ yes that is factually correct. More than twice as many 'disability' recipients have been added to the taxpayer dime since 2009 than private sector jobs have been created !!!
(snip)"discouraged workers increasingly give up looking for jobs and take advantage of the federal program.
This is straining already-stretched government finances while posing a long-term economic threat by creating an ever-growing pool of permanently dependent working-age Americans.
Since the recession ended in June 2009, the number of new enrollees to Social Security's disability insurance program is twice the job growth figure. (See nearby chart.) In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications.
As a result, by April there were a total of 10.8 million people on disability, according to Social Security Administration data released this week. Even after accounting for all those who've left the program — about 700,000 drop out each year, mainly because they hit retirement age or died — that's up 53% from a decade ago.
To be sure, disability rolls have grown steadily as a share of the workforce since the 1990s (see nearby chart).
The main causes of this broader trend, according to a study by economists David Autor and Mark Duggan, are the loosening of eligibility rules by Congress in 1984, the rise in disability benefits relative to wages, and the fact that more women have entered the workforce, making them eligible for disability.
Their research found that the aging of the population has contributed only modestly to the program's growth."(snip)
Re: weekend commentary - Your EBT Card has been Denied !
As a landlord...2/3 of my applicants get some govt or charity (with govt grants behind that) assistance.
1/2 are full disability or section 8
1/2 of those also have a full time job with an income i would approve without section 8 (then why are they getting a check? If pay is 3x rent?)
The remainder are on disability
...1/2 offering to do construction work for me (if disabled, how can you do physical work like that. If you can, GET A JOB)
...Many are disabled for "nervous conditions" such as " i dont like people".
...one girl even said " i will get a job if i have to...but why"
The real problem is many CANT. Get ANY work or they lose all benefits. So if they make $300 at a job they lose 1000$ in benefits, healthcare, etc. Nobodys gonna do that.
Re: weekend commentary - Your EBT Card has been Denied !
^^^ Indeed ! This point, i.e. that people living in places that offer generous social welfare benefits are incentivized to remain unemployed / to limit their working hours / to turn down promotions etc. in order to preserve eligibility for those generous social welfare benefits ( which are worth far more in 'equivalent cash value' than they could earn by working / working harder ), is arguably at the root of a huge future problem. Well, it's a future problem for America ... but a CURRENT problem in Greece and Spain !
All these countries now have a significant percentage of their population whose marginal skill labor is NOT needed by their national economy - at least not at gov't mandated 'minimum wage' pay rates. All these countries now have a significant percentage of their population who 'consume' more than they can 'produce' ( assuming that they are willing to try 'producing' in the first place ). And all these countries are, to one degree or another, reliant on providing ongoing social welfare benefits to continue subsidizing the standard of living of the 'non-productive' percentage of their population to the point where 'social order' can be reasonably maintained.
What happens when the gov't is no longer able to borrow additional money to continue to pay for those generous social welfare benefits ? What happens to the recipients of those generous social welfare benefits when the benefits are suddenly cut in half, or cut to zero ? Greece and Spain are providing some indication !!! And as described in the original snippet, some 2 million Americans now collecting extended 'emergency' unemployment benefits will get to find out for themselves over the course of the next year.
Re: weekend commentary - Your EBT Card has been Denied !
Quote:
Originally Posted by
Melonie
^^^ Indeed ! This point, i.e. that people living in places that offer generous social welfare benefits are incentivized to remain unemployed / to limit their working hours / to turn down promotions etc. in order to preserve eligibility for those generous social welfare benefits ( which are worth far more in 'equivalent cash value' than they could earn by working / working harder ), is arguably at the root of a huge future problem. Well, it's a future problem for America ... but a CURRENT problem in Greece and Spain !
All these countries now have a significant percentage of their population whose marginal skill labor is NOT needed by their national economy - at least not at gov't mandated 'minimum wage' pay rates. All these countries now have a significant percentage of their population who 'consume' more than they can 'produce' ( assuming that they are willing to try 'producing' in the first place ). And all these countries are, to one degree or another, reliant on providing ongoing social welfare benefits to continue subsidizing the standard of living of the 'non-productive' percentage of their population to the point where 'social order' can be reasonably maintained.
What happens when the gov't is no longer able to borrow additional money to continue to pay for those generous social welfare benefits ? What happens to the recipients of those generous social welfare benefits when the benefits are suddenly cut in half, or cut to zero ? Greece and Spain are providing some indication !!! And as described in the original snippet, some 2 million Americans now collecting extended 'emergency' unemployment benefits will get to find out for themselves over the course of the next year.
If the 1930s are any indication, the super-wealthy start fearing class warfare, and begin some major capital-imrpovement and hiring projects. Remember Rockefeller Center?