The next big hit to the economy?

http://news.yahoo.com/blogs/lookout/next-big-hit-economy-133429498.html

At the start of 2012, the extended unemployment benefits approved by Congress in December 2010, which cover a maximum of 99 weeks per person, will expire. Though the benefits are hardly lavish--a little more than $300 a week for most recipients--their total impact on the economy is huge, because so many Americans are currently taking advantage of them.

Government benefits that go to poorer Americans, like unemployment insurance, tend to boost consumer spending more than other kinds of stimulus, because people living paycheck to paycheck have little choice but to spend the money, rather than saving it. So the disappearance of jobless benefits will take money out of circulation when economic growth is seeking to gain some traction.

Indeed, economists say that the withdrawal of jobless benefits will create a major ripple effect on growth as a whole. Consumer spending accounts for around 60-70 percent of U.S. economic activity, economists say. But with so many Americans having lost wealth in the housing bust, spending has been tepid for a while, preventing the recovery from gaining any momentum. Now, the end of the extended benefits will likely soon put a further crimp in spending.




This is where the Repuke "supply side economics" fails miserably. If you give money to poor people, they will immediately go out and spend it (putting more money INTO the economy). This will in turn cause businesses to hire more workers and increase tax revenues. When you cut taxes for the super rich, they will simply save or invest it since they already have more money than they can possibly use (taking more money OUT of the economy). Taking money away from poor people and giving it to the rich only creates a cycle of layoffs and decreased tax revenues.

Of course the multinationals invest overseas and dodge taxes also taking money OUT of the U.S. economy altogether.