John Hood: Employ common sense on jobless benefits extension

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RALEIGH — According to official government estimates, paying people not to work for extended periods of time is good for the economy. This is an excellent reason why you should not take official government estimates all that seriously.

To concoct such fanciful models is to think like my children did in their pre-teen years. When it came to money, they knew only that it bought things they liked — cheeseburgers, candy, and computer games. If more was required, Dad just went to the bank and got some. Who put the money in the bank in the first place? Who cares?

Unemployment insurance is a transfer program. It moves money from some pockets (current taxpayers or bond buyers) into other pockets (recipients). Unless current taxpayers or bond buyers were going to use their cash to kindle their Yuletide fire, the result of extending unemployment insurance benefits can’t be a net increase in spending. Instead, current taxpayers will spend less on goods and services, and bond buyers will spend less on investments in other sectors of the economy.

President Obama, desperate to change the subject from health care, is trying to pressure Congress into extending federal UI benefits yet again. Not surprisingly, most Democrats and liberal activists are cheering him on. More surprisingly, some Republicans and conservative activists say they are open to the idea. Even more surprisingly, some are citing North Carolina’s recent experience as supporting Obama’s push for extended benefits.

Faced with a multi-billion-dollar debt in North Carolina’s UI program, the General Assembly enacted changes during the 2013 session to bring the state’s benefits more in line with competing states and thus reduce future debt-servicing costs. Under federal rules, that meant that as of July, North Carolina could no longer participate in extended federal benefits.

Critics predicted economic disaster. Some claim to see it now. But that’s not what the preliminary evidence shows.

From July to November, North Carolina employers added nearly 40,000 new jobs. Civilian employment, a different statistic derived from household rather than employer surveys, rose by 22,000. The state’s unemployment rate dropped by 1.4 percentage points, to 7.4 percent, while the national unemployment rate dropped by only 0.6 percentage points.

Critics point out, quite correctly, that North Carolina’s labor force also declined during the period, by about 10,000 persons a month. But they seem not to have noticed that the labor force was declining at a somewhat-faster rate, about 13,500 persons a month, before North Carolina exited the extended-benefits program.

There are two possible ways for extended benefits to elevate a state’s unemployment rate. One way is to keep recipients in the labor force who would retire, move, go back to school, or otherwise exit the program without an in-state job. The other way is to discourage recipients from taking in-state jobs they might not relish.

North Carolina’s unemployment rate has clearly fallen significantly since July. Liberals want to attribute the drop entirely to the first cause. But as Wells Fargo economist Mark Vitner points out in a new analysis, the second cause — people taking available jobs — appears to be having a larger effect on North Carolina’s numbers.

Congress should reject the president’s lobbying for extended benefits. Unemployment insurance was designed to provide temporary benefits for those who, through no action of their own, suddenly find themselves without employment or sufficient savings. It was never intended as open-ended income support. Lengthy spells of unemployment will tend to lead to retooling, retraining, or relocation as long as people aren’t presented with perverse incentives.

North Carolina isn’t a pariah when it comes to unemployment insurance policy. It is a leader.


Good argument - in the abstract, but...

this is about actual people. Not some mythical or theoretical unemployed statistic. Condemnation of selfishness is a universal theme of biblical religion, and pretty much every other religion. Where is the condemnation and outrage of my christian friends? Where is the condemnation and outrage from any religionist at all? Why are you silent on the christian right? Right now is the time to speak against this new selfishness. Why does the christian right seem so set against the poor and helpless among us. What would Jesus do? That we are even having this discussion is shameful, especially for a country that many believe to be at least christian in principle. Your own beloved John Locke said that "all wealth is the product of labor." He also said that a purpose of government is to protect property. Extending unemployment benefits supports the worker, minimally protects their property, and fulfills the charitable duties of religion. These benefits should be viewed as the product of our labor since they come from taxes on wages from our labor and the businesses where the unemployed used to work. Perhaps, you, Mr. Hood, should try a "lengthy spell of unemployment" to experience the rejuvination of spirit to find work that does not exist to feed your family. Maybe then you would appreciate a small but "perverse incentive." Support extended benefits. Is there anything else to discuss? Respectfully Submitted, Force 12

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