Extended
unemployment benefits paid during the recession were financed by a special
federal levy that hit low-income workers hardest of all, making extended
benefits a cruel hoax on the working poor!
Reinstating emergency
unemployment benefits, as U.S. President Barack Obama urges, would slow growth
and impose unconscionable burdens on the working poor. State governments provide a basic
benefit averaging $300 per week for 26 weeks. During the Great Recession,
Washington-financed additional benefits for as long as 99 weeks.
With the recovery in its
55th month, the emergency is over.
Another extension would make long-term benefits de facto permanent and
create another entitlement. Republican leaders are correct to insist
Democrats identify equivalent spending cuts or new sources of revenue.
Advocates argue those
benefits provide the strongest economic stimulus because the unemployed spend
whatever money they receive on necessities. However, their supporting studies assume other
federal programs aren't cut or taxes aren't raised to finance benefits.
Cutting other
outlays, for example on roads and schools, would have an even bigger negative
effect on gross domestic product and jobs than failing to again extend
unemployment benefits, because some of the latter wouldn't be spent but rather
be used to pay down credit cards and other debt.
Additional taxes to pay
for more unemployment benefits would impose a terrible burden on the working
poor -- the very folks Obama constantly reminds need the most help. Unemployment benefits are financed by
federal and state payroll taxes, which like the Social Security tax, cut off
when a worker's wages exceed a cap established by the various states, according
to federal guidelines. The average limit is about $12,000.
Although
these taxes are generally paid by employers, economists argue those reduce the
wages employers can pay low-income workers by a similar amount.
Indeed, some of the extended unemployment benefits paid during the recession
were financed by a special federal levy that hit low-income workers hardest of
all, making extended benefits a cruel hoax on the working poor.
Unduly long
unemployment benefits in an economy the president says is picking up steam
encourages many unemployed to postpone serious employment searches. From
Wall Street to Main Street, white collar professionals have delayed accepting
lower pay and changing occupations by running down savings and collecting maximum
unemployment benefits of about $300 a week.
Most could
easily earn multiples of those amounts even by accepting positions at somewhat
lower status than their old jobs. It takes a rather twisted view of social
justice to raise taxes on the working poor to pay professionals not to work but
that is exactly what federally financed extended unemployment benefits do.
A
recent study by the non-partisan National Bureau of Economic Research indicates
extended unemployment benefits caused most of the persistently high
unemployment after the Great Recession.
By raising the cost to
employers of hiring low wage workers, higher payroll taxes to finance benefits
discourage employers from adding new jobs -- especially in depressed areas. And
extended benefits discourages workers from moving from high unemployment
locations -- for example coal mining communities in West Virginia -- to more
rapidly growing states -- Texas and South Dakota where the oil and natural gas
boom is driving growth.
Like so many
of Obama's well-intentioned policies, emergency unemployment benefits slow
growth, limit jobs creation and incentives to work among many well-educated
Americans and place the greatest burdens on the working poor.
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