Can we get a credentials check over here? Is Larry Lindsey really an economist? It's sort of hard to figure after his appearance yesterday on Fox News Sunday.
On the show yesterday, Lindsey told viewers that unemployment checks have no stimulatory effect on the economy, no boosting of demand.
Let's go to the tape ...
HUME: I want to ask you about something else Senator Daschle said in this somewhat remarkable speech he made the other day about the economy. He was speaking of the stimulus package proposed by the Democrats.
Quote, "We included unemployment and health benefits for laidoff workers in our plan because, as any objective economist will tell you, it's one of the most effective ways to boost demand and pump money into the economy quickly."
Setting aside "objective," can you think of any economist who would make that argument?
LINDSEY: Well, I think the president, as you know, is very much for health benefits and for unemployment, but not necessarily for the reason the senator said. He's there because these people need help, and that's why we...
HUME: Can you talk about the economic theory, if there is one -- do you know of any economic theory under which health care benefits and unemployment benefits are used to stimulate the economy?
LINDSEY: Our view is that paychecks are what the objective should be here and not simply bigger unemployment checks.
HUME: And the reason for that is what?
LINDSEY: Well, paychecks are what grow the economy. People who are unemployed need help and we're all for that. But unemployment checks don't grow the economy; paychecks do.
Now, Talking Points is no economist, but he had always understood that unemployment checks not only create demand and stimulate the economy (which only stands to reason since you're putting money directly into the hands of people who immediately have
to spend it) but that this is the point. Unemployment insurance is intended
to be counter-cyclical.
Exactly when the economy is contracting and people are getting laid off you have a roughly proportional, if lesser, amount of money being injected back into the economy. It's a bit like macro-economic shock absorbers. This isn't 'some economic theory', it's Macro-Economics 101.
In any case, I'll stop there, since I'm no economist and I'll run into some error soon enough if I keep going. But maybe Larry Lindsey ain't either. Do we need to take a closer look at the serial number on that Harvard Ph.D.?
PS. Special thanks to TPM reader MP for the catch?