The thorny issue of how to deal with the chronic joblessness in the US will provide a dramatic moment this week on Capitol Hill. A bipartisan compromise between Nevada’s two Senators, Republican Dean Heller and Senate Majority Leader Harry Reid, will test GOP resolve on cutting off extended benefits after more than four years of extensions:
Senate Majority LeaderHarry Reid said Sunday that he was hopeful that five Republican senators would join Democrats this week to revive a program of expanded benefits for the long-term unemployed.
But he could name only one GOP senator who was prepared to cross party lines: Dean Heller of Nevada, who is co-sponsoring the legislation.
“Dean Heller is not some maverick that is out spewing socialism,” Mr. Reid said on CBS’s “Face the Nation.” “He is really a conservative person.… Hopefully we can get four more Republicans.”
The expanded benefits program lapsed last month. The Senate could vote as soon as Monday on a plan to revive it for three months. Even if supporters find the 60 Senate votes needed to overcome a procedural hurdle, it is unclear that the House would take up the measure.
Nearly five million long-term unemployed people will lose benefits over the course of the year unless Congress revives the program, said Gene Sperling, director of the White House’s National Economic Council.
The 26-week period of benefits is not at issue in this debate. The budget compromise passed last month that was crafted by Paul Ryan and Patty Murray did not include an extension of the 99-week coverage added after the Great Recession, which was considered at the time a stop-gap measure intended as a bridge until the Democrats’ stimulus package revived job creation. When the Great Recession ended, the civilian workforce participation rate was 65.7%, but it dropped to a 36-year low of 62.8% in November before rising slightly to December’s 63.0%.
How long will taxpayers and states be expected to fund the extended UI program? Aloysius Hogan of the Competitive Enterprise Institute says it’s already been too long in a USA Today column:
Unemployment insurance extensions in the past five years have kept at least 600,000 people out of the labor force, because people tend to ride a gravy train. That’s the conclusion of analyses by the Federal Reserve Bank of San Francisco and the National Bureau of Economic Research, respectively. The evidence is clear: Another extension of unemployment insurance would do more harm than good.
Even the recently departed chairman of the White House Council of Economic Advisers, Alan Krueger, once understood the perverse incentives at play. Before working for the Obama administration, two of Krueger’s own analyses revealed that paying people not to work actually increases the incentive not to work. And that means more time spent unemployed.
Perverse incentives impact states, as well. Extended unemployment benefits are disproportionately transferred to high-unionization, high-unemployment states such as California, Michigan, Illinois, New York and Massachusetts. And that amounts to political cronyism. Politicians in those heavily Democratic states could be pals of the current administration, but those states have a record of failure in putting people to work.
The Club for Growth announced today that they would key-vote the cloture call:
The Club for Growth urges all Senators to vote “NO” on the motion to proceed to the Heller-Reed plan (S. 1845) to extend unemployment benefits for three months with no spending offset. Consideration of the bill will likely be today. The vote will be included in the Club’s 2014 Congressional Scorecard.
Congress should end the federal unemployment insurance program and return the authority back to the states, which already have programs in place. Absent this, Congress should pay for this extension by cutting spending elsewhere in the budget. After six years, an extension can no longer be called an “emergency” with any credibility. There is plenty of waste in the federal budget from which to find an offset.
Our Congressional Scorecard for the 113th Congress provides a comprehensive rating of how well or how poorly each member of Congress supports pro-growth, free-market policies and will be distributed to our members and to the public.
This leaves Republicans in a tight spot, though, especially in an election year in which they want to focus on the damage done to the middle class by ObamaCare. The federal benefit of 26 weeks should be more than sufficient in a healthy economy, but Republicans have been arguing (with very good reason) that a workforce ratio not seen since the Carter administration is anything but healthy, at least in terms of job creation. The GOP blames Obamanomics, the stimulus in particular, and especially ObamaCare as especially damaging to the middle class, but it’s going to be difficult to shift from that and explain why the economy is good enough to end the “temporary” extension.
The White House wants to make “income inequality” the issue for 2014, and they will point to any vote that defunds UI as part of a “war on the poor.” Republicans have countered that they will support another extension if Democrats offer a pay-for that doesn’t borrow money from the future or raise taxes any further — in other words, a balancing budget cut.Note well that the Club for Growth allows for that kind of compromise by endorsing (as a fallback) a spending-offset compromise. That demonstrates that they understand the political tightrope Republicans will have to walk on this issue.