Extending Unemployment Benefits?

June 28, 2010: Last week, Senate Democrats failed to get to sixty votes to break a Republican filibuster on a bill that would have extended unemployment benefits.

Alaska Senator Lisa Murkowski joined her fellow Republicans in rejecting the bill that would have $16 billion in new aid to states, preserving the jobs of thousand of state and local government workers and an additional $47 billion to extend unemployment benefits for some 1.3 million out of work Americans.

While Republicans argued the measures would add to the nation's already crippling $13 trillion national debt, Democrats argued that the employment measures were needed to avoid a double dip recession.

The nation's unemployment rate remains high and job growth has been sluggish. Last month the majority of jobs created were temporary census jobs. With the rejection of the latest attempt to once again extend the unemployment benefit packages for workers, the question is who was right.

First we must take into consideration what Congress has done so far.

Last January, Congress passed a whopping $800 billion stimulus package to protect jobs and keep the unemployment rate at 8%. It was an expensive lesson and it didn't work as the unemployment rate now hovers at 9.7%.

The history of unemployment benefits is clear; they were designed to be temporary relief to the jobless. Workers could originally collect benefits for up to 26 weeks, and as long as 39 weeks in areas that were deemed to have high unemployment.

Last year a package was approved by Congress to allow extensions of unemployment benefits for up to 99 weeks. That package expired on June 2. Chronic long term unemployment is currently affecting almost half of the unemployed as 46% of all jobless workers have been out of a job for at least six weeks.

Looking at the severity of the employment picture for those seeking work, extending unemployment benefits may at first glance seem sensible.

However a closer look tells a different story.

First the country doesn't have the money to continue paying for people not to work. The $47 billion may seem like small change with some of the checks that Congress has been writing lately, but it is in the larger picture we see where extending these benefits will drive a significant cost shifting we can't afford.

The money will have to be borrowed and paid back by workers and employers tomorrow by higher taxes. And tomorrow, according to Democrats, taxes are already going up.

Two days before the Senate rejected extending unemployment, Democratic House leader Steny Hoyer (D-Maryland) stated publicly that the much touted middle class tax cuts would eventually have to be phased out. Too expensive given the rising national budget woes, Hoyer told the press.

You will remember that during the Presidential campaign in 2008, Barack Obama promised that 95% of the middle class would be getting a tax cut. Now that appears to be swallowed up by the growing spending spree that Congress has embarked upon over the last two years.

Second, studies are beginning to show that the longer you offer unemployment benefits, the longer people choose not to look for work.

According to a study in Industrial and Labor Relations Review showed that roughly a third of those unemployed in the United States find work almost immediately when the their benefits expire.

The study written by Stephan Jurajda and Frederick Tannery also concludes that current extensions of unemployment benefits have lengthened the average stretch of unemployment by three weeks or more.

It has even been pointed out that Nobel Prize-winning economist Paul Krugman, who is no conservative, wrote in his book "Microeconomics": "Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect."

By comparison, the United States offers much more austere unemployment benefits than our European counterparts which economists point to as the reason why the U.S. has historically hosted a much lower unemployment rate.

A growing body of evidence shows that the more lengthy the benefits, the less incentive workers have to seek employment.

This is not to say that unemployed are lazy, but less motivation is inevitable if there is protection from the full ramifications of being unemployed. 

Alaska's Senator Lisa Murkowski was right in voting against extending unemployment benefits which would have added billions to the nation's debt and provided little benefit other than to enable more people to rely on government assistance.