Relief of the jobless
President Obama returned Sunday from his 16day Hawaiian vacation to a capital in the grip of a “polar vortex.” On Saturday, before saying “aloha” to the Kailua vacation house he rented for $56,000, he wanted to show himself as a man of the people, many of whom became unemployed under his economy.
“Just a few days after Christmas,” said Mr. Obama, “more than 1 million of our fellow Americans lost a vital economic lifeline, the temporary insurance that helps folks make ends meet while they look for a job. Republicans in Congress went home for the holidays and let that lifeline expire.” The president himself was first to leave town, more than a week before the expiration of benefits, but he insists nevertheless that “denying” an extension “is just plain cruel.” (Just not as cruel as his missing his flight aboard Air Force One would have been.)
Since the Great Recession began in 2008, Congress has supplemented the 26 weeks of jobless benefits traditionally provided by the states, extending them to 99 weeks. Ordinarily, this wouldn’t be an issue because such extensions have been temporary, but Mr. Obama’s economy has spawned a jobless “recovery,” and more workers continue to join the unemployment line. Democrats see this not as an opportunity to reconsider the failure of Obamanomics, but as an excuse to spend another $25 billion. The Senate will vote this week on a three-month extension with a $6.5 billion price tag.
As a practical matter, Republicans won’t take a principled stand against a benefit program. The question is whether the billions spent subsidizing unemployment will be offset by spending cuts, or whether the extra billions will be added to the $17.3 trillion in national debt, as Democrats propose to do by declaring the unemployment expense an “emergency” exempt from the spending caps. This designation is unnecessary, as Sen. Tom Coburn, Oklahoma Republican, says. His “Wastebook 2013” chronicles 100 examples of wasteful federal government spending, totaling $30 billion, more than enough to offset a full year’s jobless benefits.
There’s a negative consideration to extending unemployment subsidies time after time. A 2008 Princeton University study comes to the obvious conclusion that workers are much more aggressive in their job searches as their benefits near the end, “increasing sharply in the weeks prior to benefit exhaustion.” Alan B. Krueger, a former chairman of Mr. Obama’s Council of Economic Advisers, was a co-author of the report. A Swedish study, finished in 2008 as well, concluded that more generous unemployment benefits increased unemployment rates. The linkage, it said, is “fairly robust.”
The year before, Sweden reformed its unemployment compensation system, such that recipients could receive up to 60 weeks of benefits, but with a catch. The longer someone is unemployed, under the new program, the less he receives in assistance. The diminishing benefits have been a powerful inducement to look for work. Neither Sweden nor anywhere else in Europe usually come to mind as guidance on economic or social policy, but if lawmakers are cornered by politics into endorsing an extension, they should consider doing it Swedish-style.