This phenomenon is taught in many principles classes and is explained using a numerical example in "The Unemployment and Labor-Force Participation Rates." To summarize the numerical example, the unemployment rate is an imperfect statistic. To be counted as unemployed, a worker must actively seek employment. As workers become discouraged, the unemployment rate can fall as the economy worsens. The opposite can happen as the economy improves. Discouraged workers, finding new hope in an improving economy, start seeking employment. They are now counted as unemployed and the unemployment rate rises.
The sunset of the Bush tax cuts is a hot topic and Geithner explains the Obama administration's plans.
What the President believes is the best strategy for the country is to extend the tax cuts that go to more than 95 percent of Americans, more than 95 percent of small business. Keep taxes on capital income low going to moderate...The administration is in a tough position. They must simultaneously argue that tax increases on 95% of the Americans are bad while increases on the remaining 5%, the rich, are good. Perhaps they will argue that the rich got theirs in form of the TARP, the Wall Street bailout, but only a small fraction of the rich, Wall Street commercial and investment bankers, directly benefited. Extraordinarily low interest rates maintained by the fed also benefit Wall Street bankers and harm savers, and America needs to save more. Why is trickle-down economics that extends tax cuts to all Americans including the rich bad while trickle-down policies Wall Street good?
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