Last week, Peyton argued that, “If the goal of policy is full employment, there are likely much better ways to accomplish this than unemployment insurance, and the drawbacks of this program [to extend UI benefits] are not to be rejected out of hand.” As he accurately points out, “The debate among economists is not about whether unemployment benefits generate additional unemployment, but the extent to which they do.”
But Peyton ignores a key distinction that needs to be made between strong and weak labor markets. What do you think is stopping us from reaching full employment (heck, I’d settle for Clinton-era unemployment numbers) right now? Is it likely to be laziness, or is it likely to be the massive recession we’re haltingly emerging from? Now, if we were in the midst of boom years, and unemployment was at 4 or 5 percent, you might justifiably say to the long-term unemployed, “Hey, everybody else is doing it, so go get a job. It can’t be that bad out there.” And lowering or canceling their benefits after a certain point might be the kick in the rear that those people needed.
But in a terrible job market, with five applicants for every opening, people aren’t unemployed because they’re lazy; they’re unemployed because there aren’t very many jobs available. Taking away their unemployment benefits will make them a little more eager to find a job, willing to settle for a little less than they would have. And for that reason it might, taken in isolation, have a modest salutary effect on the unemployment rate. But it’s going to have a massive negative impact on millions of people who were already just barely getting by.
So now we get to the issue of whether the Republican line on unemployment benefits is an “insult” to the unemployed, as Nancy Pelosi claimed, earning Peyton’s chagrin. Here I think we need to make another important distinction: yes, taking away benefits will make people marginally more likely to find work, but those people are likely to think (almost always with good cause) that they’ve been trying to find work all along. Those two things aren’t inconsistent. The vast majority of the unemployed have been trying to find work; taking away their benefits will make them a little more desperate to do so. But to suggest that they haven’t been trying at all—that’s the insult.
Have Republicans been doing that? As one prominent Republican might say, you betcha!
(From Steve Benen)
Sharron Angle, the extremist Republican Senate candidate in Nevada, considers the unemployed “spoiled .” One GOP congressman recently compared the unemployed to “hobos.” In the House, GOP lawmakers tried to eliminate a successful jobs program. Sen. Orrin Hatch (R-Utah) actually started pushing a measure to require the unemployed to take mandatory drug tests in exchange for benefits. Kentucky’s Rand Paul wants the jobless to quit their bellyaching and “get back to work.”
And the Republican candidate for the PA Senate seat said recently, “The jobs are there. But if we keep extending unemployment, people are just going to sit there.”
Imagine how that sounds from the perspective of the average unemployed American. You’re getting about $300 a week to take care of your family. You’ve gone to jobs fairs, you’ve scoured the Internet, you’ve set your sights lower than you hoped to. And still nothing.
And now the minority party has prevented an up-or-down vote from taking place to extend your benefits. The money is going to dry up, and it’s sink or swim for you. But you know what? It’s for your own good, because you’ve been lazy, and this is exactly what you need to get you off the couch.
Again, it might be perfectly true that you’ll be a little more motivated to find work. I grant that that’s true. But it’s still insulting to talk like this to real Americans who have struggled and are struggling.
On top of all that, consider everything else we know. Like the fact that the Senate’s biggest opponent of the lazy unemployed, Jim Bunning, voted for extending unemployment benefits in 2003. Which was the year before he and a Republican president came up for re-election. Just saying.
Or how about the fact that extending benefits would have added $35 billion to the debt, versus the $678 billion that would be added by continuing the Bush tax cuts? Yet Jon Kyl, the second-ranking Senate Republican, thinks you “never” should have to offset a tax cut; only increased spending requires a budgetary offset. Their concern for the deficit, the purported reason why Republicans are canceling Americans’ unemployment benefits, turns out to be phony? Yes, I think that’s insulting.
Now, about the other part of this problem: Is it true that extending benefits is not just the humane, but also the most unemployment-reducing thing to do? Peyton says it is “at least plausible that unemployment insurance generates greater demand for workers,” but he’ll have to do better than that. Unemployment benefits are the second-most stimulative policy, right behind that other handout to the idle poor, food stamps.
Tax cuts, which are Peyton’s preferred policy, do well too. They’re a good stimulus, and it’s economically intuitive why they would be: they put money in people’s pockets, which people go out and spend, creating demand for more workers to meet the increased consumer demand. That’s probably why Obama’s stimulus was one-third tax cuts.
So, to sum up, Peyton is absolutely right that, if you want full employment, you don’t want to have very generous unemployment benefits. You can only get full employment in a strong economy, and in those circumstances, generous benefits are more likely to encourage people who could otherwise be employed to stay home and collect. (Note that a lot depends on how generous those benefits are; I hardly consider $300 a week generous.) But in any case, the goal of policy isn’t to reach full employment, at least not now. The goal is to bring down the unemployment rate and mitigate Americans’ financial hardships. Extending unemployment benefits would do both.