On Sunday, the extended unemployment compensation program will expire. Normal benefits last for 26 weeks. But during recessions, Congress usually extends these benefits by an addition 13 weeks, for 39 weeks total. The latest recession is no exception. Extended benefits were implemented in March 2001 and renewed twice. But on Dec. 21, the latest extension expires. This means that a maximum of 26 weeks will go back to being the case, except for those already receiving extended benefits.
Needless to say, Democrats are up in arms because Republicans failed to renew the extended benefits program before Congress left town. Rep. David Obey, D-Wisc., spoke for most in his party when he attacked the "Scrooges that are running the other party" for letting extended benefits expire just before Christmas. Rep. Charles Rangel, D-N.Y., said the action (or inaction) "borders on being immoral."
There is no question that the timing could have been better. But extended benefits had to expire sooner or later, and I doubt there would ever be a time when Obey and Rangel would not try to score some political points over it. Indeed, a case can be made that extended benefits should have been allowed to expire before now. That was the plan a year ago, but at the last minute the White House panicked and demanded a further extension, making Republican leaders in Congress look like the bad guys.
The basic rationale for extended benefits is that the average duration of unemployment rises during recessions. Since 1970, the median duration of unemployment has averaged 8.2 weeks in the year after a recession and 6.6 weeks at other times. In November, the median duration of unemployment was 10.4 weeks. This means that the vast majority of unemployed never come close to exhausting regular benefits.
Economists have long recognized that unemployment insurance plays a valuable role in encouraging workers to accept greater flexibility in the labor market. This flexibility is essential for economic growth, but also has the effect of destroying jobs. Fortunately, in a dynamic labor market such as we have here in the United States, it usually creates more than enough new jobs for all those that are lost. In a typical quarter, about 8 million jobs are lost and another 8 million jobs are created, according to the Bureau of Labor Statistics.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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