In the News, Politics & Policies

Unemployment Insurance in US / Has it increased joblessness ?

House-Senate negotiators are close to a modest budget accord to avoid another government shutdown, but suddenly the White House is introducing a last-minute demand. Five years into an economic recovery that President Obama often hails as miraculous, he wants to extend unemployment benefits one more time.

Maybe it’s time to consider whether the big expansion of unemployment insurance has increased joblessness. In 2009 the Obama Administration and Congress extended jobless benefits for up to 99 weeks. The point was to help people through the recession, but now the jobless rate is 7%, down from 10%, and the White House still wants another extension.

That would add some $25 billion to the deficit with no compensating economic benefit. The Administration claims that every $1 of jobless benefits creates $1.80 in economic growth, based on the notorious \”multiplier\” in Keynesian economic models. This is the theory that you can increase employment by paying more people not to work, and that you can take money out of the private economy by taxes or borrowing without cost. If that theory worked, the government should pay everyone not to work.

This also ignores that states and employers are already paying for this supposed free lunch in the form of higher job-killing payroll taxes under the Federal Unemployment Tax Act, or Futa. At least 24 states have been forced to raise this tax since 2010 and the Labor Department says it will rise again in 13 states to repay $20 billion in loans and interest they owe the feds for helping to finance state-funded benefits. This federal tax is applied to 0.6% of a worker’s first $7,000 of annual wages. The rate rises automatically by 0.3% for every year states fail to repay their unemployment insurance loans from Uncle Sam.

Chosen excerpts by Job Market Monitor. Read the whole story at 

WSJ

via Review & Outlook: How to Keep Workers Unemployed – WSJ.com.

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