President Obama regularly touts a reduced unemployment rate. In his 2015 State of the Union, he boasted of a 5.6 percent unemployment rate, noting this was “lower than it was before the financial crisis” in 2008. If you accept his assumptions, he is right. Never mind the 92.9 million Americans no longer in the labor force, no longer looking for work. Never mind the 62.7 percent labor participation rate, lowest in four decades. Never mind the move to part-time and marginal work, which brings actual unemployment to 11.2 percent (the so-called U-6) rate. And never mind Americans kept in jobs propped up by the Federal Reserve’s unprecedented bond buy-back program, or “quantitative easing.” Let us just take this president at his word.
Now look at America’s grinding, seven-year near-recession in another light. The president and Congress, under then-Senate Majority Leader Reid, stretched the generous 26-week federal unemployment benefits (six and a half months) to 99-weeks (five weeks short of two years). They did this back to back, not just once. Eventually, they split the burden with states, arguing that they would have to pick up 50 percent of the benefits provided over 26 weeks.
The adverse effect of this disincentive to work has been breathtaking. In the context of 92 million Americans no longer looking for work, two-year federal unemployment benefits suddenly became a norm, and many states still drag federal money from the budget to finance the disincentive for more than 26 weeks. This looks less like a solution and more like the problem. After all, who wants to work when you can be paid to have leisure?
Enter: A program worthy of immediately ending – after all, Mr. Obama says unemployment is down. Let’s end this unjustified largess. Let’s drop back to something like North Carolina has adopted, a 12- week benefits effort – that is, three full months – to reward income producing activity. Talk about a success story: Governor Pat McCrory cut state unemployment benefits, rather than raising taxes. Rather than bend toward the Democrats’ clamor for 14 more weeks of benefits, above the 26-week level, he curtailed them all. He pulled them down from 26 weeks to 12 weeks. Moreover, he dropped top benefits from $535 dollars to $350. Wonders never cease: His budget not only improved, but unemployment dropped five months running, to a record low. It has continued to fall since, reaching 5.5 percent real unemployment in December 2014. South Carolina and Georgia quickly followed suit, with similar effects.
So, when the incentive not to work is replaced by an incentive to work, people found jobs within a matter of three months, not needing two full years of paid leave. The answer: Try what works and stop bankrolling endless months of leisure, with concomitant drops in productivity, Gross Domestic Product, job creation and taxpayer revenue. And as we all know, more revenue means more taxes paid to Uncle Sam. Create a virtuous circle, not a vicious one.
But there is more: Maybe the program needs to help those who really need help – older Americans on fixed incomes. Within weeks, President Obama will announce that national inflation is so low this year that, like 2009 and 2010, those on fixed federal incomes – including Social Security recipients – will get a zero “Cost-of-Living Adjustment” (COLA), under the current formula. While he could change this, the COLA for seniors is headed for zero.
Ironically, while Americans at large have experienced minimal growth and thus minimal inflation in a flat economy, older Americans – especially those living on military and Social Security pensions – have been losing ground. They generally pay more for medical care, housing and other goods and services, both in absolute terms and proportionate to their incomes.
What is the answer? As President Obama leaves seniors in the cold (literally), we should do better. How about this solution: End extended federal unemployment benefits (pulling them back to 12 weeks, and resolutely ending 50 percent payments to states over 26 weeks). These go to people not working, not paying into Social Security and not serving in the military.
Instead, let’s use the billions of dollars saved to offset a simple, one-time, one-percent COLA for all older Americans – many of whom served in the military, paid a lifetime into the Social Security system and deserve enough benefits from those services to pay their groceries, rents and medicine. Save the rest of the unemployment entitlement checks for a tax cut for average Americans. It is about time, isn’t it?
In short, let’s stop penalizing America’s seniors with a zero COLA when they pay more and are the ones who paid longest into Social Security, often also serving in our military. Let’s stop paying those who refuse to work, stop creating a 26-week-plus disincentive and get back to common sense. Let’s follow the lead of low unemployment states like North Carolina and get America back to work – while taking care of our senior citizens and enabling a tax cut with what remains. It is about time we started protecting our seniors, living up to promises and thinking straight again – they protected us, lived up to their promises and taught us how to think straight. Can Congress get this done? If not now, when? Let’s go.