What Does the Unemployment Rate Mean for Government Spending?

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Dr. Keith Hall presents on unemployment and the economy for this Capitol Hill Campus event.

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What Does the Unemployment Rate Mean for Government Spending?

  1. 1. Slide 1: Main Points Income Redistribution •  Increasing share of government spending is transferring income from current or future taxpayers to the jobless. Government Dependency •  Hit record high. Will ever return to “normal” level? Nothing Helps Like Jobs •  Joblessness impacts government spending. It is not so clear that the reverse is true.
  2. 2. Slide  2:  Employment  Ra1o   66%   64%  share  of  working  age  popula1on   10.5  million  jobs   62%   60%   58%   shaded  areas  denote  recession   56%   1990   1995   2000   2005   2010   Source:  Bureau  of  Labor  Sta8s8cs   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  3. 3. Slide 3: Unemployment Impact on GovernmentThree types of effects:1.  Slower growth of income slows tax revenue2.  Government spending on unemployed Increases3.  Government spending on low-income families increases
  4. 4. Slide  4:    Loss  of  Na1onal  Income   $18   $16   $14   Poten8al  GDP  trillions  of  2012  dollars   $12   GDP   $10   $8   Loss  =  $1  trillion/year   $6   $4   $2   shaded  areas  denote  recession   $0   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis,  Congressional  Budget  Office   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  5. 5. Slide  5:  Current  Gov’t  Receipts  &  Expenditures   (share  of  GDP)   40%   35%   30%   25%  Percent   20%   Current  expenditures   15%   Current  receipts   10%   shaded  areas  denote  recession   5%   0%   1950   1955   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis,   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  6. 6. Slide 6: How Does GovernmentSpending Enter Into GDP?Four Main Types of Government Spending 1.  *Government Consumption (46%) 2.  *Government Investment (8%) 3.  Transfer Payments (43%) 4.  Interest Payments (8%) *part of GDP
  7. 7. Slide 7: Federal GovernmentSpending and GDP Four Main Types of Government Spending 1.  *Government Consumption (27%) 2.  *Government Investment (4%) 3.  Grants-In-Aid to S&L Govt (12%) 4.  Other Transfer Payments (47%) 5.  Interest Payments (8%)
  8. 8. Slide  8:    Government  Spending  by  Type   (share  of  GDP)   25%   19.5%  of  GDP  in  2012   20%   Consump8on  &  Gross  Investment   Social  Benefits   15%  percent   Interest  Payments   10%   5%   shaded  areas  denote  recession   0%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  9. 9. Slide  9:    Changing  Role  of  Federal  Government   (share  of  GDP)   15%   Consump8on  &  Gross  Investment   Social  Benefits   Interest  Payments   Grants-­‐in-­‐aid  to  state  and  local  governments   10%  percent   5%   shaded  areas  denote  recession   0%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  10. 10. Slide  10:    Rise  of  Dependency   Social  Benefit  as  Share  of  Personal  Income     20%   18%   16%   14%   12%  percent   10%   8%   6%   4%   2%   shaded  areas  denote  recession   0%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  11. 11. Slide  11:  Receipt  of  Social  Benefits  by  Type   15%   shaded  areas  denote  recession   Unemployment  Compensa8on   Other  Social  Benefits   Means  Tested  Spending  (approximate)  share  of  personal  income   10%   5%   0%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  12. 12. Slide 12: Programs Targeting theUnemployed1.  Unemployment Insurance •  Unemployment Compensation •  Trade Adjustment Assistance •  Disaster Unemployment Assistance2.  Healthcare Assistance •  Health Coverage Tax Credit •  Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)3.  Job Search and Training Assistance •  Workforce Investment Act of 1998 •  Wagner-Peyser Act of 1933
  13. 13. Slide  13:  Unemployment  Compensa1on     $180   $160   $140  billlions  of  current  dollars   Emergency   $120   Other   $100   $80   $60   shaded  areas  denote  recession   $40   $20   $0   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  14. 14. Slide 14: Means-Tested Programs•  Low income, available regardless of employment status •  126 different federal programs•  Largest programs (billions) o  Medicaid  –  $417.3   o  Supplemental  Nutri8onal  Asst  Program  (SNAP)  –$74.6   o  Supplemental  Security  Income  –  $52.6   o  Earned  Income  Tax  Credit  -­‐-­‐  $56.6   o  Child  Tax  Credit  –  $28.3   o  Federal  Pell  Grants  -­‐  $41   o  Temporary  Assistance  for  Needy  Families  (TANF)  –  $21  
  15. 15. Slide  15:  Trends  in  Social  Benefits     and  the  Jobless  Rate   25%   50%   share  of  working  age  popula1on   20%   45%  share  of  personal  income   15%   40%   10%   35%   Social  Benefits   5%   Jobless  Rate  (right  axis)   30%   shaded  areas  denote  recession   0%   25%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Bureau  of  Economic  Analysis,  Bureau  of  Labor  Sta8s8cs   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  
  16. 16. Slide  16:    Trends  in  the  Poverty     and  Jobless  Rates   25%   50%   share  of  working  age  popula1on   20%   45%  share  of  popula1on   15%   40%   10%   35%   Poverty  Rate   5%   30%   Jobless  Rate  (right  axis)   0%   25%   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005   2010   Source:  Census  Bureau,  Bureau  of  Labor  Sta8s8cs   Produced  by  Keith  Hall  ,  Mercatus  Center  at  George  Mason  University.  

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