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Business correspondent Paul Solman on the latest debate over extending unemployment benefits.
With their colleagues in the senate having already left for the year, members of the House last week debated one final item before leaving: Extending unemployment benefits to jobless workers, as the senate had already agreed to do. House democrats, led by Wisconsin's David Obey, pressed republicans to allow a vote on a bill that would continue the current extension through February.
REP. DAVID OBEY:
The only thing that stands between providing these needed unemployment benefits… the only thing that stands between our doing that is the refusal to approve bringing the bill up by the house republican leadership. So the Congress is here insisting on playing scrooge at Christmastime, when we ought to be showing a little mercy. I don't understand that kind of logic. I don't understand that kind of priorities.
But Majority Leader Dick Armey, on his final day in Congress before retirement, was not ready to give in.
REP. DICK ARMEY:
I do appreciate your sense of urgency, but the fact of the matter is I am assured that when the next Congress convenes, that those people who are covered by the current extension of unemployment benefits, and who would be covered by any additional extension of unemployment benefits, would be able to receive their compensation flow in an uninterrupted fashion through this period of time.
Laid-off workers are entitled to 26 weeks of unemployment insurance. Earlier this year, as is usual in recessions, the federal government granted a 13-week extension to those still out of work. But because the House didn't act before adjourning, 830,000 unemployed workers will now exhaust their benefits by December 28. And beginning the next day, an estimated 95,000 jobless workers per week will exhaust their benefits. The debate over benefit extensions comes at a difficult moment, when long-term unemployment is at a ten-year high, one in five jobless workers has been out of work for six months or more, and the number of people dependent on the extended benefits program is rising sharply as more and more people reach their cutoff date.
There are those, therefore, who think this is a critical time to be extending benefits, like Jeffrey Wenger of the Economic policy institute, who joins us from Washington. And there are those, like Ron Bird of the Employment Policy Foundation, who are more supportive of Congress' caution. He joins us from Montgomery, Alabama, where he's celebrating Thanksgiving. Gentlemen, thanks for joining us, both.
Mr. Bird, was the House being scrooge-like or sensible?
I don't think the House was being scrooge-like, Paul. I think that Mr. Armey's comments that we can expect to see some attention to this issue when the new Congress reconvenes in January, that any interruption of benefits will be minor and will be made up, is an important thing to consider. I think everybody is concerned about the unemployed, and we want to provide help for the unemployed. But we have to recognize that the help that the unemployed need the most is a job, not just an extended unemployment benefits check. And we really… it's a complicated issue that should not be rushed in the last minutes of a closing session of Congress, but needs a thorough, careful, and reasonable examination of all the elements of the issue.
Even if people are going to lose their benefits at least for a while, that's okay, as long as we're not jumping into something that might be precipitous; is that your point?
Well, I think it's important to realize that the temporary extended unemployment benefits program was a temporary program. It… whenever you end a temporary program, there are problems with adjustment to that. I think that the method of ending it, phasing it out and so forth, needs to be looked at more carefully, and also in the context of looking at the overall unemployment insurance program. Certainly the seasonal timing here leaves a lot to be deserved… or a lot to be…
But we knew what you meant. Mr. Wenger, does the extension of benefits create overly great expectations, if we're staying with a Dickens theme here? I mean, is there something about them that you can fairly argue with?
The extension is needed help for the people who haven't had a job for a very long period of time. So it seems curious to me that even though we may not experience an interruption, we're going to nevertheless get one. Regardless of what Representative Armey said, these benefits will be interrupted for people.
Explain this, just technically. Let's say I'm unemployed and I've been getting my benefits and I've had my 26 weeks, and now I'm in my, I don't know, seventh extra week. Am I going to get my full 13 extra weeks and then get cut off?
No, you're not. This has got what we call a hard deadline, so the week of the 28th, you're cut off completely.
I see. That's why it's 830,000.
It's 830,000 that day. And as a result, you'll not receive any benefits until Congress reconvenes and reestablishes an extension to this program, which for most people, they don't want to go two to four weeks without receiving a paycheck, after having experienced six to ten months of unemployment. This seems to me to be folly.
So, Mr. Bird, what's the argument for reconsidering the program? I mean, what's wrong with the program, since on its face you think, hey, somebody is out of work, they're out of work longer than they used to be because of the nature of the job market or something, and therefore Congress extends the benefits? I think most people would say, "Gee, that's a good thing; it would be bad that it gets cut off," especially, as even you acknowledge, at Christmastime.
As I said, the seasonal timing here is not the best thing in the world. And you need to look at how the end of a temporary program is phased out. It's important to recognize too that all extended benefits are not being cut off. There are two distinct extended benefits programs. One is the regular extended benefits program that is triggered at individual state levels by individual state rules. Right now, Washington and Oregon have extended benefits under their normal state programs. Their recipients will continue receiving benefits. The temporary extended benefits program was instituted last March by Congress as a temporary expedient in response to the special circumstances, special pressures put on the labor market by the terrorist attacks in the fall. And it was seen as a temporary expedient.
But it's a temporary expedient, if I'm not wrong, Mr. Wenger, that the United States has been putting in when there are recessions for decades.
Yeah, absolutely. I mean, this has been a program that we've developed and worked hard to build over time, and yet what we see is in 1991, this extension was… or these types of extensions were in place for 20 weeks, and they took place over three years. So there was a much more generous set of extensions in the previous recession. To say that these were in some way related to the events of September 11 seems to not really reconcile the facts with what's actually occurred.
But I think more fundamentally, the thing that we need to look at is just extending benefits is not really solving the problem for the unemployed. I think the question we need to look at is, why are extended benefits necessary? Why are people exhausting their benefits after 26 weeks? Why isn't the system working as it was designed, to help people find jobs quicker?
I see. So you're afraid that unemployment insurance may wind up being a kind of a welfare program that keeps people from actually looking for work.
Well, certainly people who are unemployed face a lot of hurdles, and the original design of the system combined the weekly benefits with also going to the unemployment insurance office and getting help, getting coaching, getting guidance, getting assistance to help you, encourage you, in the process of looking for jobs, to give you job leads and so forth. I think one of the things that's gone wrong in recent years is in the.. first of all, the resources provided for the operation of the job service offices has not kept pace with the level of the number of unemployed people that need to be served. Secondly, they've adopted new approaches that maybe don't reach out and proactively provide the unemployed with the services they need.
Mr. Wenger, would you respond to this? What's your take on this?
I think that's putting the cart before the horse. I mean, in essence, saying that the unemployment insurance system is in some way responsible for unemployment is putting the cart before the horse. We have an economy right now that has 8.1 million unemployed workers, and three-and-a-half million job openings. There is virtually nothing workers can do about getting jobs. And to argue that this is a malfunction with the unemployment insurance system or it's inadequate funding for the employment services is just missing the fundamentals of the economy right now. We have a big deficit in the number of people firms are willing to hire. And what this program does is it provides temporary assistance until the economy rectifies itself.
Mr. Bird, isn't it the case that the reason people are out of work longer is because it's so much harder to find work?
Certainly that's an important aspect of it. And I agree with what Jeff said, that we need to get this economy moving faster; we need to get the job creation engine going again. But even when we do that, we will still see a lot of variation among the states, as we did in 1998, 1999, in the exhaustion rates among the states. And I think that reflects differences in how the system is operating in terms of getting the other half of the equation together: Providing the unemployed with the help they need and the help they deserve to find new jobs quickly. An unemployment system that works best is one that gets people back to work.
Mr. Wenger, what would you address to fix the system? What do you think is wrong?
Well, I mean, the job service isn't going to put food on the table, isn't going to pay your health insurance, isn't going to do the kinds of things that you need when you don't have a job.
And it isn't going to create jobs that aren't there.
And it's not going to create jobs. So we need to adequately fund and finance the unemployment insurance system, and make sure that all the people who are working are covered by the system. We have allocated money for the extension… the extended benefits program, and we can't spend that money in any other way, other than to use it for extended benefits. So we have $24 billion waiting to be spent for this purpose, and Congress failed to act.
One last point. You wrote recently in an economics journal that this economy needs stabilization, automatic stabilization measures– that is, things that kick in automatically when the economy is in recession or in danger of going into recession, and one of them you cited was the old system of unemployment insurance. Can you explain that very briefly? We don't have much time, and I'd like to get…
The unemployment insurance system is a very, very effective automatic stabilizer. It puts money into people's hands who will spend it, and it puts it into the local communities that are experiencing the highest levels of unemployment. So it's extremely well targeted, and it's automatic. We don't have to wait for Congress to act. If we passed good legislation, we would only strengthen that system.
Mr. Bird, don't you think that extending the benefits system would provide a much-needed economic stimulus at this point?
And certainly we need benefits as well as other kinds of stimulus right now. I think that what's happening is that we're going to have Congress in the new session looking carefully at this entire issue, and I hope that they will take a broad look at it, and not just go to the short-term immediate need, but also while recognizing those needs, also look at the deeper aspects of the problem.
Okay, great. Well, thank you very much, and Happy Thanksgiving to you both.
Thank you, Paul.
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