Sticking it to the unemployed
Cutting off extended benefits for the unemployed not only hurts individuals who've been laid off but could dampen the economic recovery.
Washington is poised to stop providing extended unemployment benefits despite the huge number of laid-off workers, the paucity of job openings, the high rate of underemployment in every sector of the economy and stubbornly slow economic growth. That's because Republicans in the Senate insist that, unlike the hefty tax cuts they covet for the wealthy, the comparatively slender subsidies for the unemployed must not be financed with borrowed money. This penuriousness is not just hypocritical, it's bad economics.
The current federal program, which offers up to 73 extra weeks of unemployment benefits to idled workers, is due to expire Nov. 30. If it does, about 2 million unemployed people will have their benefits cut off in December — 411,000 of them in California. Their prospects for finding work remain unusually dim; according to the Bureau of Labor Statistics, there are still five job hunters for every opening.
Unemployment insurance not only helps keep individuals afloat after they're laid off, it counteracts an economic downturn. As economists at the Congressional Budget Office and elsewhere have noted, providing unemployment benefits is a particularly effective economic stimulus because idled workers are likely to spend their benefits rather than save them. According to one study, that spending could support nearly half a million jobs.
The downturn in the economy has been so severe that even the extended benefits haven't bought enough time for many Americans to find work. Four million people are expected to have exhausted their extended benefits by April; with so many cash-starved consumers, spending could fall again next year and dampen the recovery.
Some critics assert that lengthening the benefits period prompts people to spend more time looking for work instead of quickly taking a job that pays less and requires less skill than their previous positions. That's not a persuasive argument when there are so few jobs to be had. Regardless, attacking any disincentives to work should be done by changing the way the unemployment insurance program is designed, not by just pulling the plug on benefits.
Congress should continue to provide extended benefits at least until the unemployment rate falls from its current level — 9.6% as of October — to 7.2% or less. For the past half a century, Congress has always extended unemployment benefits until the jobless rate has fallen at least that far.
Yes, the extended benefits are costly — another year's worth would cost about $65 billion. But Republicans have shown with their stance on the Bush-era tax cuts that they have no compunction about raising the deficit for the ostensible purpose of helping the economy. And when it comes to helping the economy, unemployment benefits deliver far more bang for the buck than holding down the top marginal tax rates.