Pass the Damn Unemployment Benefits!

by steve benen | July 5, 2010

This post originally appeared on Washington Monthly.

Senate Democrats have spent quite a bit of time lately trying to pass extended unemployment benefits, but to no avail — Senate Republicans and Ben Nelson (D-Neb.) refuse to let the chamber vote because, as they see it, the deficit is more important than the economy.

All available evidence suggests this is a terrible mistake, not only for the added hardship on struggling families, but also for the economy, that benefits from stimulative jobless aid which is invariably spent. For decades, extended unemployment benefits during difficult economic times, financed through deficit spending, was a political no-brainer that enjoyed bipartisan support. As the GOP moves sharply to the far-right, those days are over.

Republican arguments vary, though most simply conclude “deficit = bad,” but one approach is especially problematic. Senate Minority Whip Jon Kyl (R-Ariz.), the Senate’s second-highest ranking Republican, believes that extended aid for the jobless makes unemployment worse, “continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Paul Krugman considers whether this makes any sense at all.

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

Someone really ought to let Jon Kyl and his GOP colleagues know. Unless their goal is to hurt the economy, they’ll no doubt want to reverse course and allow the Senate to vote on extended unemployment benefits the moment lawmakers return next week.