How Both Parties Win the Unemployment Debate by Screwing the Unemployed

As long-term unemployed are left out in the cold, Democrats and Republicans will both find political silver linings in Congress’ failure to extend long-term benefits.

NORTH MIAMI, FL - JANUARY 07: A job seeker looks at a list of jobs available as the Senate votes on extending the Emergency Unemployment Compensation (EUC) program.
National Journal
Alex Seitz Wald
Add to Briefcase
Alex Seitz-Wald
Jan. 17, 2014, midnight

Long-term un­em­ploy­ment in­sur­ance is all but dead. Con­gress will take up the is­sue again after it re­turns from the re­cess that be­gins Fri­day, but even if a bill passes the Sen­ate (where it failed twice on Tues­day), it’s prob­ably dead on ar­rival in the Re­pub­lic­an-con­trolled House.

How could Con­gress fail to ad­dress per­haps the most im­port­ant eco­nom­ic is­sue of the day? Demo­crats rightly blame Re­pub­lic­ans. All but a hand­ful of GOP­ers op­pose re­new­ing the ex­ten­ded be­ne­fits — which were cre­ated as an emer­gency meas­ure dur­ing the depth of the re­ces­sion — on the grounds that the pro­gram boosts the de­fi­cit and breeds a cul­ture of de­pend­ency.

But both parties stand to gain something polit­ic­ally if the be­ne­fits are not re­stored (they ex­pired in late Decem­ber), even as people who have been out of work for a long time get screwed.

Here’s why: Cut­ting off the be­ne­fits will al­most cer­tainly cause the un­em­ploy­ment rate to drop. When it does, Re­pub­lic­ans will feel ideo­lo­gic­ally vin­dic­ated, while Demo­crats will have some good eco­nom­ic news to sell to voters ahead of the 2014 elec­tion.

There are two forces that push down the un­em­ploy­ment rate when be­ne­fits ex­pire, and while eco­nom­ists aren’t ex­actly sure how much re­spons­ib­il­ity to as­sign to either, the out­come is the same either way.

The first ex­plan­a­tion is that people col­lect­ing be­ne­fits get off the dole and find jobs. “You do a dis­ser­vice to these work­ers. When you al­low people to be on un­em­ploy­ment in­sur­ance for 99 weeks, you’re caus­ing them to be­come part of this per­petu­al un­em­ployed group,” Sen. Rand Paul said on Fox News in early Decem­ber. The idea is that people col­lect­ing be­ne­fits who have been hold­ing out for a bet­ter job will now take whatever they can get.

The more likely ex­plan­a­tion is the al­tern­at­ive, which as­sumes that many of the people who lose their be­ne­fits will get dis­cour­aged and give up on find­ing a job. Be­cause the gov­ern­ment counts people as un­em­ployed only if they are cur­rently look­ing for work, there will sud­denly be a lot few­er un­em­ployed people, at least in the eyes of the of­fi­cial stat­ist­ics.

Re­mem­ber, these people have been out of work for a very long time, and nu­mer­ous stud­ies sug­gest that many of them will simply not be able to find jobs, no mat­ter how hard they try, thanks to em­ploy­er dis­crim­in­a­tion and poor job pro­spects. Many re­cip­i­ents may have kept up their job search — and thus con­tin­ued to get coun­ted as “un­em­ployed” — only be­cause they’re re­quired to do so in or­der to col­lect un­em­ploy­ment-in­sur­ance be­ne­fits.

“Both of these forces bring down the un­em­ploy­ment rate, but for very dif­fer­ent reas­ons,” said Aaron Chat­terji, who teaches at Duke Uni­versity’s busi­ness school and pre­vi­ously served as a seni­or eco­nom­ist in the White House Coun­cil of Eco­nom­ic Ad­visers.

Mi­chael Fer­oli, the chief U.S. eco­nom­ist for JP­Mor­gan Chase, es­tim­ated that the “lapsing of [ex­ten­ded un­em­ploy­ment com­pens­a­tion] could lower the un­em­ploy­ment rate by per­haps 0.25%-0.50%-pt, with much of the ef­fect com­ing through re­duced labor force par­ti­cip­a­tion, rather than in­creased em­ploy­ment.” Gold­man Sachs says the drop could be as high as 0.8 per­cent­age points if all 1.3 mil­lion Amer­ic­ans who are ex­pec­ted to lose their be­ne­fits give up look­ing for a new job.

Chat­terji’s state provides a nat­ur­al ex­per­i­ment. Back in Ju­ly, North Car­o­lina’s GOP-con­trolled le­gis­lature cut the max­im­um length of long-term un­em­ploy­ment be­ne­fits, and re­duced the size of weekly checks, pres­aging what will hap­pen na­tion­ally if Con­gress con­tin­ues to sit on its hands. Since then, the un­em­ploy­ment rate in North Car­o­lina has fallen by about 1.5 per­cent­age points to a five-year low.

At the same time, North Car­o­lina saw its biggest drop ever in work­force par­ti­cip­a­tion, sug­gest­ing that most of the ex­plan­a­tion for the drop is that people just quit look­ing for work, as Evan Soltas ex­plained for Bloomberg. It’s im­port­ant to de­term­ine why cut­ting be­ne­fits pushed the rate down, but there’s little doubt that it did.

And here’s how politi­cians from both parties can win polit­ic­ally, even as the un­em­ployed lose.

For Re­pub­lic­ans, the drop in the un­em­ploy­ment rate gets touted as proof of their anti-safety net world­view. “More people got off un­em­ploy­ment and either got jobs or moved back to where they were go­ing or came from,” North Car­o­lina Gov. Pat Mc­Crory said last week­end when asked why his state’s un­em­ploy­ment rate dropped.

That’s no help to Tar Heel Demo­crats, who have been re­leg­ated to the gov­ern­ing minor­ity. But na­tion­ally, if the trend fol­lows, then the White House and con­gres­sion­al Demo­crats can point to the fall­ing un­em­ploy­ment rate as evid­ence that their shep­herd­ing of the eco­nom­ic re­cov­ery for the past five years has been suc­cess­ful. And the drop in the rate would hap­pen just as can­did­ates are gear­ing up for the elec­tion.

So far, Demo­crats don’t seem to be tak­ing that bait. They des­per­ately want to pass an ex­ten­sion of un­em­ploy­ment be­ne­fits for more im­port­ant reas­ons (you know, help­ing people). But if and when that ef­fort fails, there’s at least a polit­ic­al sil­ver lin­ing for them wait­ing — as long as they’re will­ing to pa­per over the fact that the work­force par­ti­cip­a­tion rate has fallen dan­ger­ously along with the un­em­ploy­ment rate.

Mean­while, the long-term un­em­ployed are worse off than ever.

What We're Following See More »
HE LASTED SIX MONTHS
Sean Spicer Resigns
3 minutes ago
THE LATEST

He resigned this morning, "telling President Trump he vehemently disagreed with the appointment of New York financier Anthony Scaramucci as communications director." Per Politico, "chief of staff Reince Priebus and chief strategist Steve Bannon" were opposed to the appointment, while "Jared Kushner, Ivanka Trump, National Economic Council Director Gary Cohn, and Deputy National Security Adviser Dina Powell" were supportive...Another White House official said Spicer was gracious while breaking the news of his departure, offered some praise for Scaramucci, while saying he would help with a transition."

Source:
STAFF IS PUSHING BACK
Trump Wants Scaramucci to Helm WH Communications
2 hours ago
THE LATEST

"President Trump is expected to announce that Wall Street financier Anthony Scaramucci will be White House communications director, according to two sources familiar with the planning. Trump has left the role open since Mike Dubke resigned in May, and the President has vented frequently to his friends about the performance of his press operation." According to NBC News, Steve Bannon and Reince Priebus are resisting the move.

Source:
NEW GALLUP POLL
Trump’s Approval Rating a Record Low at 6-Month Point
2 hours ago
THE DETAILS

"President Donald Trump's second-quarter job approval rating has fallen below what any other past president has gotten during the same time frame. A new Gallup poll found that Trump averaged a 38.8% rating between April 20 and July 19. The average approval rating for that time is 62%. President Obama was at the average during this time period, as was President Nixon. President Clinton is the only president who was below 50% by the second quarter, coming in with a 44% approval rating." There is also a large partisan gap. "Just 8% of Democrats approved of Trump's job performance during the second quarter, but 85% of Republicans did. Approval ratings have become increasingly polarized in recent administrations, but the 77-point gap for Trump is a new record."

Source:
ANNOUNCEMENT IMMINENT
Government to Bar Americans from Visiting N. Korea
2 hours ago
THE DETAILS

"The US government will soon prohibit American citizens from traveling to North Korea, according to two tour groups that cater to Western tourists who want to visit the secretive country. The US will announce the ban within a couple of days, said Simon Cockerell, general manager of Beijing-based Koryo Tours. The agency was informed of the development by officials of the Swedish government, which represents America's interests in North Korea, he told CNN."

Source:
NEA AND NEH GET $145 MIL EACH
House Appropriations Ignore Trump’s Proposed Arts Cuts
4 hours ago
THE DETAILS

"Federal arts and humanities programs targeted for elimination by the Trump administration would get a lifeline from House appropriators willing to ignore the president’s proposal and keep them running. The $31.5 billion fiscal 2018 Interior-Environment spending bill approved by the House Appropriations Committee on Tuesday includes $145 million for the National Endowment for the Arts. While that’s still a 3.2 percent cut from the fiscal year 2017 enacted level, it is more than $116 million above Trump’s budget request. The National Endowment for the Humanities would receive $145 million in fiscal 2018, which is $103.7 million above the White House budget request."

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login