Extending Jobless Benefits - The Down Side

Congress is debating whether to extend unemployment benefits for another 20 weeks. This is an unending path of people staying unemployed and Congress, led by Democrats and supported by the Obama administration, trying to play the "compassionate" role and handing out more money. Meanwhile, there are some facts that get tossed aside by the Democrats.


First, they pledged to move to a "pay as you go" budgeting system; but this was all political rhetoric on the of part of the Democrats with no intent of actually having the revenue to pay for the expense. There is NO PLAN to fund the $90 billion jobless benefits through any increase in revenue.

Second, there are so many PORK PROJECTS in the phony Stimulus bill and in in ObamaCare, that hundreds of billions could be available for jobless benefits but are not available due to the irresponsible spending and the $1.4 trillion deficits being run up by Obama and the Democrats. If Obama wanted to decrease unemployment he would have reduced corporate, capital gains and income taxes. But he is more interested in making history with major social legislation, not something mundane like creating jobs.

Third, one study after another has shown that extending jobless benefits gives people an incentive to remain out of work. For example, one of Obama's own economists, Alan Kruger, concluded in a 2008 study that "job searches increase sharply in the weeks prior to benefit exhaustion". Obama's own White House economic advisor, Lawrence Summers wrote in 1999 in the Concise encyclopedia of Unemployment that "The second way government assistance programs contribute to long-term unemployment is by providing an incentive NOT to work. Each unemployed person has a 'reservation wage' the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase the reservation wage, causing an unemployed person to remain unemployed".

Fourth, giving people an additional incentive to stay out of work puts them at long term risk for remaining out of work as they lose critical skills and contacts. Options such as changing type of job, relocating to different cities or states and retraining get passed over as the unemployed remain comfortable with jobless benefits until it is too late to rejoin the workforce.

It's ironical, that the Democrats think they will appear as the compassionate party by extending jobless benefits but in the end this will help keep unemployment higher and therefore work against them in the election.