Subsidize Unemployment, Get More Of It

IBD Editorials ^ | October 13, 2008 | John R. Lott, Jr

[Kaslin]

The almost continuous rise in new unemployment insurance claims since the beginning of July confirms many people's fears about the economy's weakness. In fact, however, it is a sign of Washington at work.

New unemployment claims declined slightly last week to 478,000. But as CNN, for one, pointed out, the numbers had just "edged off a seven-year high." CNN also linked the high numbers to the "financial meltdown." Similarly, on Oct. 3, the Department of Labor announced that another 159,000 jobs were lost in September.

After beginning to rise in early January, initial jobless claims peaked this last March. New jobless claims either fell or leveled off after that — until July, that is, when they started to rise and kept on rising ever since. After leveling off in June, the unemployment rate also shot up in July and August.

But what happened? What changed in July? The increase has had only one cause: longer jobless insurance benefits. President Bush signed the Iraq war-funding bill on June 30. It increased unemployment insurance benefits to 39 weeks from 26 for claims filed after the law went into effect July 6.

If you don't think the unemployment insurance matters, what do you think happened to the initial jobless claims during the week between when Bush signed the legislation and when new claims would be eligible for the 13 weeks of additional benefits?

[supercat]

Rather than having a fixed duration of benefits, why not have a benefit that decreases exponentially with a longer term of unemployment? The total cost of the benefit would be bounded, but the pressure to find work would be more gradual.

[aimhigh]

Unemployment is up, but very few states have triggered onto extended benefits, which pays an extra 13 weeks during periods of “high” unemployment. There is a lot of hype being used for political purposes.

[DannyTN]

Some of these safety nets allow a greater degree of risk taking in our economy which is ultimately good for the economy. They also help stabilize communities and the economy during periods of change which allows time for the community to adjust instead of allowing ripple effects to throw even more people out of work.

It’s true that unemployment benefits sometimes result in more or longer unemployment, but it’s not without some benefits.