The Senate Struggles with Unemployment Benefits
When the Senate returns next week, it must confront a bit of unfinished business—what to do about extending unemployment benefits. As fans of the ongoing soap opera that is the World’s Greatest Deliberative Body already know, the Senate failed to pass the unemployment bill before rushing out of town for its Fourth of July holiday. And just before the Labor Department issued a discouraging report that suggested private job creation may be slowing.
As you might expect, the headlines describing the senate's inaction were not flattering. Efforts to extend jobless aid for up to 20 more weeks stalled when nearly all Republicans (and one Democrat) refused to vote for it unless its $34 billion cost was fully funded. Some lawmakers also opposed the extension on the grounds that it would encourage the unemployed to stay out of work longer. Neither of these arguments is pursuasive, especially given the Senate’s parallel effort to extend $32 billion in special interest tax subsidies.
It is pretty clear the economy still cannot stand on its own feet, and nearly all analysts agree that unemployment benefits are a strong stimulus. Recipients generally spend the assistance ($300-a-week on average) immediately, which boosts the rest of the economy. It is hard to fight the humanitarian argument either. About 2.5 million will lose benefits if Congress does not extend aid by mid-July. Many of these folks are in serious distress. No job. No health insurance. And right now, no prospects.
It is true, as well, that those receiving benefits are somewhat less likely to accept a job offer than those whose aid has run out. However, most researchers find this effect is small, especially when jobs are very hard to get, as they are now. With work so scarce, few will turn down a job offer for the temporary pleasures of $300-a-week.
The funding argument is even harder to swallow. I’d be more sympathetic with these new converts to fiscal responsibility if they were as enthusiastic about paying for extending $32 billion worth of special interest tax breaks as they are about funding the unemployment extension. If I understand correctly, these lawmakers insist that Congress fund every dime of added jobless aid, which nearly all analysts agree will help boost the economy. But they feel no need to pay for continuing these special interest tax breaks, which will not. They fret about unemployed workers who allegedly game the system to get jobless benefits but seem undisturbed by those businesses and individuals who do the same to maximize their tax subsidies. Politics is indeed a funny business.