While the big news in government policy to fix the U.S. economy last week was the progress of the financial reform bill, a story that will gain more attention in the coming weeks and months is Congress not further extending certain unemployment benefits.
It’s an age old question: Do government payouts to help those in a fix give the helping hand that helps people stand on their own two feet, or provide an incentive not to help one’s self? Obviously every individual situation is different, and no doubt many who receive unemployment compensation work hard to land a new job, and the benefits help meet critical family needs in the interim. But it can also be argued that for some, benefits will be a crutch that saturates motivation to pound the pavement.
The program that Congress did not extend provided up to 99 weeks of benefits—almost two years—and its expiry may end benefits to 1.3 million Americans. 1 The wisdom of letting this happen can be reasonably disputed. Some will argue that ending benefits risks upsetting the delicate recovery process, others will say that this is the push needed to get people back to work.
The fact that the Obama administration was not able to push this through Congress when both the House and Senate are controlled by Democrats may reflect that even those in more liberal quarters are becoming exhausted with the expansion of government benefits and deficit growth. However, failure to pass the legislation may also be due to the fact that the administration has used so much of its political capital to win passage of the health care legislation (now the Patient Protection and Affordable Care Act (PPACA)) and advance the financial reform bill that it simply lacked the pull to extend the unemployment benefits.
Regardless of the why the bill died, expect economists and other market commentators to increasingly focus on the question of how the ending this program will affect the employment numbers as new jobs reports come in.
- “Jobless Bill Dies Amid Deficit Fears,” Gregg Hitt & Sara Murray, Wall Street Journal, p. A1, A2, June 25, 2010. [↩]