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Should Unemployment Benefits Be Extended?

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Since December of last year, Democrats in the Senate have once again been pushing to extend unemployment benefits that had already been extended many times. Senate Republicans are not opposed on principle, just on how the extended benefits should be paid for, along with some minor details and procedural issues. The question that no one in the Senate or the media seems to be asking is, “Should unemployment benefits be extended in the first place?”

According to the Congressional Budget Office, the $6.4 billion Emergency Unemployment Compensation Extension Act (S.1845) “would extend the Emergency Unemployment Compensation (EUC) program for three months — through March 31, 2014. The EUC program allows qualified states to provide up to 47 additional weeks of federally funded unemployment compensation to people who have exhausted their regular unemployment benefits.”

Barack Obama said that passing this bill should be the “first order of business in 2014” for Congress. Speaking at the White House while surrounded by unemployed Americans whose benefits expired at the end of last year, he called unemployment insurance “a vital economic lifeline” essential to “make sure that this recovery leaves nobody behind.” “Congress should pass this bipartisan plan right away, and I will sign it right away,” he added. The long-term unemployed “are not lazy” and “desperately want work,” he explained.

Senate Majority Leader Harry Reid, who accused Republicans of “continually denigrating our economy, our president and frankly, I believe, our country,” insisted that “in the end of the day [sic], this debate is not about amendments or Senate procedure; this is about 1.4 million desperate Americans who, through no fault of their own, need the help of their federal government.”

Although the Republican-controlled House has not yet entertained any proposal to renew extended unemployment benefits, according to House Speaker John Boehner, “One month ago I personally told the White House that another extension of temporary emergency unemployment benefits should not only be paid for but include something to help put people back to work. To date, the president has offered no such plan.”

The initial EUC program was established on June 30, 2008, in the Supplemental Appropriations Act of 2008 (P.L. 110-252, H.R.2642). It was expanded on November 21, 2008, by the Unemployment Compensation Extension Act of 2008 (P.L. 110-449, H.R.6867). Both bills passed the Democrat-controlled House and Senate with overwhelming Republican support. And both bills were signed into law by a Republican president. Extended unemployment was extended several more times over the years since then, most recently in the American Tax Relief Act of 2012 (P.L. 112-240, H.R.8). And because the Republicans have controlled the House since the 2010 election, this most recent extension of unemployment benefits that has now expired could never have happened without Republican complicity. But that’s not all: the Republican majority in the House also helped to extend unemployment benefits by means of the Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78, H.R.3765) and the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96, H.R.3630).

So, although Democrats and Republicans disagree on the particulars, they both favor extending unemployment benefits; that is, they favor continuing the policy of transferring wealth from Americans who work to Americans who don’t.

But did not the unemployed pay into the unemployment system when they were employed? One sometimes hears it said that the unemployed are entitled to benefits because they paid into the system.

Well, first of all, the extended benefits are paid for by the federal government, that is, all the taxpayers, and have no relation to what anyone paid into the system. In other words, the extended benefits are welfare payments. And second, regular unemployment benefits are likewise welfare payments.

Some people have the idea that unemployment insurance is funded like Social Security and Medicare. Those programs — which are also welfare programs — are partially funded by employee payroll deductions. But as I point out in Social Insecurity, there is no relation between Social Security and Medicare “contributions” paid and benefits received.

It is even worse in the case of unemployment, for unemployment taxes under the Federal Unemployment Tax Act of 1939 (FUTA) are generally paid only by employers (only the states of Alaska, New Jersey, and Pennsylvania also assess unemployment taxes on employees). The U.S. Department of Labor oversees the unemployment-compensation program, but it is administered and mostly funded by the states. Federal unemployment taxes are paid by employers at a rate of 6 percent on the first $7,000 of each employee’s income. The 50 states likewise assess employers an unemployment tax, but employers that pay state unemployment taxes are allowed a credit against their federal unemployment tax liability up to 5.4 percent. The state maximum rates range from 5.4 (Alaska, Colorado, Florida, Hawaii, Mississippi, Nevada, New Mexico) to 13.5 percent (Maryland). The state wage bases range from $7,000 (Arizona, California) to $41,300 (Washington). Twenty-three states actually raised their wage base for 2014, which is no different from a tax increase, since the result is that more tax revenue is collected. The maximum monthly unemployment benefit for a person with no dependents ranges from $235 (Mississippi) to $679 (Massachusetts). The point here is that the amount of compensation received by an unemployed worker has no relation to the amount of tax paid in by his employer.

The problem with extended unemployment benefits is the same problem with regular unemployment benefits:

They pay people for not working. Not because they can’t work, but because they don’t work. One’s assets and net worth are irrelevant in determining eligibility for benefits. But once it is accepted that someone is entitled to receive benefit payments from the government because he is not working through no fault of his own but is available for work, no logical argument can be made against continuing unemployment benefits indefinitely as long as someone is not working through no fault of his own but is available for work.

They pay people to not work. Contrary to Obama, some Americans who collect unemployment benefits are “lazy” and don’t “desperately want work.” They are perfectly content to collect unemployment benefits until they run out and then look for another job. Unemployment compensation provides a disincentive to work, especially if one can make just as much by not working as he can by working a job at a lower pay rate than the one he lost.

They are rife with waste, fraud, and abuse. According to the U.S. Department of Labor, “states recorded some $7.7 billion in improper unemployment insurance payments in 2013,” “estimated improper payments run as high as 18.16 percent in Nebraska,” and “Louisiana posted the highest estimated fraud rate in the nation last year, at more than 7 percent.”

They are an illegitimate function of government. Contrary to Harry Reid, it is not the job of government to “help” people. Contrary to Obama, it is not the job of government to provide a “lifeline.” And contrary to the Republican Party’s latest budget, it is not the job of government to have a “safety net.” And it is certainly not the function of government to provide anyone with any form of insurance.

They redistribute wealth from one American to another. Thus, the case against government-provided unemployment benefits is the same as the case against food stamps, Head Start, TANF, WIC, SSI, LIHEAP, SCHIP, and subsidized housing. It is incredibly inconsistent to support unemployment benefits and at the same time oppose all other forms of welfare.

Should unemployment benefits be extended? Of course not. But unemployment benefits should not be extended not because they are too expensive, or because they have been extended enough times already, or because Congress can’t agree on how to pay for them. Unemployment benefits should not be extended for the same reason that regular employment benefits should be eliminated — they transfer wealth from Americans who work to Americans who don’t.

 

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