Should Jobless Benefits Be Extended for the Eighth Time?

An editorial in The Wall Street Journal this week discusses the proposal to extend jobless benefits for the eighth time since the recession started.  This extension would mean the unemployed can collect benefits for up to 99 weeks, nearly two years.  Is this a good idea from an economics point of view?  Is this compassion?  Or, are we creating a new, semi-permanent welfare state program that encourages people not to find work?  Let’s talk about it now.

The unemployment statistics are not good.  After 18 months and $862 Billion stimulus, unemployment is at 9.5%, there’s a 5-to-1 ratio of job seekers-to-job openings, 6.7 million Americans have been out of work for at least six months, 2.5 million American workers will run out of unemployment benefits, and about 2 million jobs have been lost.

What can we learn from economics?  Without question, economists know that if you subsidize something, you get more of it.  Of course, many of us have heard anecdotal evidence as well of unemployed people who only seriously look for work right before their benefits expire.  More rigourous economic studies confirm that when unemployment benefits are extended, actual average unemployment duration increases.

What can be done?  No one wants to see the truly needy and unemployed suffer.  But, adding another $30B of deficit spending on top of $1.4 Trillion of deficit spending isn’t a great recipe for economic success.

The answer to the problem is not more unemployment benefits and it’s not more deficit spending.  It’s to create a lot more jobs in the private sector.  How do we accomplish this task?

The answer is a change in fiscal policies.  America needs to lower taxes on economic growth.  We need to cut taxes on income, savings, and investment.  We also need to cut big government deficit spending.  We can’t tax and spend ourselves into prosperity.

America needs pro-growth fiscal policies that have a proven track record of creating new jobs.  They worked in the past.  They will work again.  Will Washington wake up in time – before we get into a double-dip recession or worse, a depression?

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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