President Obama and Democrats are pushing hard to convince Republicans they need to extend unemployment benefits. One of Obama’s appointees on the Council of Economic Advisors is warning that not extending the benefits will cost the economy a quarter of a million jobs.
These would be the same people who argued last February that letting the sequester kick in would be devastating for the economy—and the economy had one of its best years since Obama entered office.
Proponents argue that the recipients will spend the money immediately, which will spur economic growth. But how does it help the economy to take a dollar from Peter and give some of it—because the government takes a cut—to Paul, just because some bureaucrat thinks Paul will spend it faster than Peter?
While it’s true that higher-income people save more than lower-income families, the personal savings rate is only a little over 4 percent. Plus, saved money is loaned to people and companies that want to spend it.
Democrats also claim it’s the compassionate thing to do: Millions of Americans still can’t find a job in the Obama economy.
It may sound counterintuitive, but extending unemployment benefits keeps more people unemployed for longer, just as raising the minimum wage—another Obama proposal—will increase income inequality.
As the American Action Forum pointed out in October, the multiple unemployment benefit extensions have kept the unemployment rate artificially high. “Whereas the unemployment rate reached 9.9 percent, these results [in the AAF study] indicate it would have only peaked at 8.7 percent. The unemployment benefit extensions added as many as 1.3 percentage points to the unemployment rate and prevented as many as 1,950,000 unemployed people from finding jobs.” The reason is that when government taxes something we get less of it; when government subsidizes something we get more. Unemployment benefits subsidize unemployment.
Unemployment benefits were created as a temporary safety net to help people who lost a job. They were never meant to be a permanent entitlement to subsidize the unemployed—which is what they’re becoming under this president.
We can certainly sympathize with the long-term unemployeds’ plight, but it’s a direct result of Obama’s economic and regulatory policies. And his effort to extend unemployment benefits only exacerbates the problem—while insulating him from taking responsibility for his policies.