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Monday, July 05, 2010

Paul Krugman: Punishing the Jobless

Is there any hope that unemployment benefits will be extended when the Senate returns from its holiday weekend?:

Punishing the Jobless, by Paul Krugman, Commentary, NY Times: There was a time when everyone took it for granted that unemployment insurance, which normally terminates after 26 weeks, would be extended in times of persistent joblessness. It was, most people agreed, the decent thing to do. ... Yet the Senate went home for the holiday weekend without extending benefits. How was that possible?
The answer is that we’re facing a coalition of the heartless, the clueless and the confused. ...
By the heartless, I mean Republicans who have made the cynical calculation that blocking anything President Obama tries to do — including, or perhaps especially, anything that might alleviate the nation’s economic pain — improves their chances in the midterm elections. Don’t pretend to be shocked: you know they’re out there, and make up a large share of the G.O.P. caucus.
By the clueless I mean people like Sharron Angle, the Republican candidate for senator from Nevada, who has repeatedly insisted that the unemployed are deliberately choosing to stay jobless, so that they can keep collecting benefits. A sample remark: “You can make more money on unemployment than you can ... getting ... an honest job... We’ve put in so much entitlement into our government that we really have spoiled our citizenry.”
Now, I don’t have the impression that unemployed Americans are spoiled; desperate seems more like it. One doubts, however, that any amount of evidence could change Ms. Angle’s view of the world — and there are, unfortunately, a lot of people in our political class just like her.
But there are also, one hopes, at least a few political players who are honestly misinformed... — who believe, for example, that ... extending benefits would make unemployment worse... So let’s talk about why that belief is dead wrong.
Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits ... are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”...
But it’s an effect that is completely irrelevant to our current situation. When the economy is booming,... generous unemployment benefits may keep employment lower than it would have been otherwise. But ... right now the economy isn’t booming..., 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,... 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 ... is a recipe for even weaker job growth ... over the next few months.
But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but ... penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.
So, is there any chance that these arguments will get through? Not, I fear, to Republicans: “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, in this case, his hope of retaking Congress — “depends upon his not understanding it.” But there are also centrist Democrats who have bought into the arguments against helping the unemployed. It’s up to them to step back, realize that they have been misled — and do the right thing by passing extended benefits.

    Posted by on Monday, July 5, 2010 at 12:33 AM in Economics, Social Insurance, Unemployment | Permalink  Comments (60)


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