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America’s Unemployed Need Employment, Not Extensions
January 17, 2014
Republicans in the Senate threw the brakes on yet another extension of already extended federal unemployment benefits on Tuesday. The motion to invoke cloture on S. 1845, the Emergency Unemployment Compensation Extension Act, failed on a party-line vote. S. 1845 would have extended federal unemployment benefits through the end of March.
It’s easy to see why such a seemingly small, stop-gap measure, one that would provide tangible help to the many who are struggling to find employment during our ongoing economic downturn, would appear to be a no-brainer to some. However, as I explained in our vote alert issued last week:
The relatively short three-month timeline of this scheme belies its very real and substantial cost. The Congressional Budget Office estimates S. 1845 will increase the deficit by $6.6 billion in 2014. Despite a prolonged fight this fall over out-of-control federal spending, S. 1845 makes no attempt to offset these billions of dollars in new spending.
Our out-of-control national debt and significant deficits each year are creating considerable drag on our economy. It’s irresponsible of Congress to consider new spending without cost-saving reforms or commensurate spending cuts. When it became clear that offsets would be needed to try to move S. 1845 forward, Senator Reed (D-RI) who was also the lead sponsor of S. 1845, proposed an amendment that would have extended benefits for eleven months paid for by prohibiting “double dipping” and tacking on an additional year of spending caps that would keep the sequester in force until 2024. While it’s true that eliminating “double-dipping,” the practice of receiving both unemployment and disability benefits, would be a good, cost-saving reform, another year of sequester is little more than an accounting gimmick.
As evidenced by the Omnibus spending bill in Congress this week, legislators can’t appropriate within even the modest spending caps of the 2011 Budget Control Act now. Assuming they’ll do any better in 2024 is highly questionable. Luckily, the amendment failed, ensuring the cloture vote that followed was also doomed.
It’s worth wondering though, if the unemployment insurance extension was offset, would that be worth supporting? From a strictly budgetary perspective, making sure the new expenditure is paid for is of primary concern to taxpayers. However, research indicates that perpetually extending benefits doesn’t do the unemployed any favors. From the House Ways and Means Committee:
And despite Democrat claims that such spending on UI benefits is the “best stimulus,” all this record-setting benefit spending has bought is the slowest recovery on record. Perhaps not surprisingly, a new study identifies the EUC program as the cause of the painfully slow labor market recovery – as employers have withheld new job offers until after the Federal extended benefits program ends. Another study reinforces that such programs have been behind recent jobless recoveries.
The studies available at the links above illustrate that extending unemployment benefits increases unemployment as employers are discouraged from posting vacancies and workers are discouraged from searching, creating a lose-lose scenario for the labor market. At the same time, what vacancies are available tend not to go to the long-term unemployed. Because the longer someone is jobless, the harder it is to get hired, perpetual extensions provide the unemployed with little, if any, benefit.
As high unemployment rates continue year after year and increasing numbers of individuals stop trying to seek jobs at all, it’s clear that this business as usual approach to unemployment insurance is failing both taxpayers and the unemployed alike. Rather than rubber-stamp extensions, offset or not, legislators should take the time this national crisis deserves to consider real reforms. I mentioned just two in the vote alert:
Block-granting federal unemployment insurance would reduce federal meddling and empower states to ensure scarce dollars are allocated where they are most needed, thereby saving taxpayers money. Stricter guidelines to encourage job-seekers to get back to work sooner could help to disincentivize long-term unemployment, itself a hindrance to re-employment.
But there are lots of other great ideas out there that should be on the table as well. Just this month our friends at the R Street Institute rolled out their own proposals to help the unemployed get to where the work is, overcoming one of the biggest hindrances to employment the labor market is facing. The whole paper is worth a read. Congress can also take up other reforms to help spur job growth such as lowering the corporate tax rate, eliminating costly regulations, repealing the death tax, and many others.
Offsetting unemployment extensions is a good first step, but to really help the unemployed, Congress should let business get back to work.
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