Column: Rand Paul gets the Scrooge award
By Ruth Marcus
WASHINGTON — The year’s not over, but it’s not too early to declare the hands-down winner of this year’s Scrooge award: Sen. Rand Paul.
The Kentucky Republican wants to cut off people’s unemployment benefits — not to save taxpayers’ money from being frittered away by loafers unwilling to haul themselves out of their comfy hammocks to look for work. No, Sen. Scrooge wants to cut out of solicitude for the long-term unemployed.
Because, as the kindly doctor explained (correctly) on “Fox News Sunday,” it is clear that the longer people are unemployed the more difficulty they have finding work. Ergo, says Paul, the obvious solution: Limit the length of unemployment benefits — even if there are not jobs available.
“I do support unemployment benefits for the 26 weeks that they’re paid for. If you extend it beyond that, you do a disservice to these workers,” Paul said. “When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy.”
Paul is wrong, by the way, about the 99 weeks — the longest combined state and federal benefits can now last is 73 weeks, and then only in three states where unemployment has hovered above 9 percent. Elsewhere, depending on the severity of unemployment, the maximum duration is between 40 and 63 weeks.
But Paul is more fundamentally wrong with his diagnosis that the best way to help this unfortunate group is to terminate their benefits. Talk about burning the village in order to save it. Long-term unemployment benefits don’t cause long-term unemployment; they ameliorate it in hard economic times. (States generally cover benefits for the first 26 weeks, but during downturns the federal government has long stepped in to subsidize extended help.)
Yes, I know about moral hazard. In a well-functioning economy, overly generous unemployment benefits may dissuade people from taking new jobs. But this is not a well-functioning economy. Even with unemployment at a five-year low, nearly four of 10 jobless workers count as long-term unemployed, out of work for 27 weeks or longer. In October, there were nearly three people unemployed for every available job.
One relevant data point: when President Bush signed an extension of unemployment benefits in June 2008, the unemployment rate was 5.6 percent, the long-term unemployment rate was 1 percent and the average duration of unemployment was 17.1 weeks. Today those numbers are 7 percent unemployment, 2.6 percent long-term unemployed and 37.2 weeks in duration.
Another point: This could easily be you. According to a new report by the White House Council of Economic Advisers, 40 percent of the long-term unemployed had household incomes, prior to job loss, between $30,000 and $75,000. One in five has a bachelor’s degree or higher. The more education you have, the less likely you are to fall into unemployment. But once you’re unemployed, your education offers no shield against joining the ranks of the long-term unemployed.
And about those overly generous benefits. They average $300 weekly. Would that be enough to keep you on the unemployment rolls? Ironically, long-term benefits help keep people in the job market — looking for work is a condition of receiving help — rather than simply giving up. Cutting them off would likely cause the unemployment rate to fall, but only because they would be out of the workforce.
Another indication that correlation is not causality: Most of those in the ranks of the long-term unemployed have exhausted their benefits. Of 4.1 million in the ranks of the long-term unemployed, only 1.3 million are still receiving the unemployment checks that Paul asserts are holding them back.
Republicans cite two recent studies as proof that, as the House Ways and Means Committee put it, emergency benefits are “the cause of the painfully slow labor market recovery.” But the bulk of academic research suggests that extended benefits only slightly increase the length of time people are out of work, mostly because of flexibility to find a suitable job rather than grasping at the first offered.
As researchers at the Federal Reserve Bank of San Francisco recently concluded, “Our estimates suggest that extending unemployment insurance benefits in weak labor markets has virtually no effect on the rate of job finding.”
If Paul and fellow Republicans had their way, 1.3 million jobless would be cut off by year’s end, another 1.9 million in the first half of 2014. Two words suffice in response: Bah! Humbug!
Ruth Marcus’ email address is email@example.com.