By maintaining expanded unemployment benefits through 2013, the Obama administration delayed the national economic recovery from the Great Recession in 2009. A National Bureau of Economic Research study concludes that 1.8 million additional jobs were created in 2014 once the benefit was finally cut.
Most of these jobs were filled by those outside the labor force who, in the words of the study’s authors, “would not have participated in the labor market had benefit extensions been reauthorized.”
Congress, which is currently considering extending supplementary federal unemployment benefits set to expire at the end of the month, risks making the same mistake roughly a decade later.
The CARES Act, passed in March to deal with the economic fallout from the coronavirus, authorized $600 per week in temporary unemployment benefits in addition to the traditional jobless payouts awarded at the state level. Expanded unemployment aid served a purpose when the national economy was in a coronavirus coma. But this welfare now creates a powerful disincentive to returning to work. When people can make a few thousand dollars a month sitting on the couch, a job doesn’t look so good.
A recent study by the Committee to Unleash Prosperity finds that four out of five benefit recipients receive more money from unemployment than they’d earn by returning to work. This unintended consequence is a huge barrier for reopening small businesses, which must compete with government largess to entice their employees to return.
More broadly, keeping employees at home on the dole versus reengaging as productive members of society hamstrings the economic recovery. The Committee estimates that prolonging these federal benefits will cost the economy ten million jobs.
Congress must let these benefits expire so that the nation can return to work and the economy can hum again. That doesn’t mean policymakers can’t do anything to help. They can pass a payroll tax holiday for employees and small businesses, eliminating one of their biggest expenses and leaving them with more funds to hire and spend in their communities. The Committee projects that suspending the payroll tax would create 2.7 million jobs.
Democrats, however, want to extend supplemental unemployment in perpetuity. They are aided by a sympathetic media, which ignores logic and human nature for emotional appeals. “Millions Relying on Pandemic Aid Can See Its End, and They’re Scared,” reads a New York Times headline. As outgoing Times opinion writer Bari Weiss highlighted in her resignation letter last week, such considered analysis is verboten in today’s mainstream media where a “predetermined narrative” and leftist “orthodoxy” reign supreme.
The longer these benefits last, the harder it will be to take them away. Democrats likely see them as a backdoor to 1) a $15 minimum wage because small businesses will have to offer at least this pay for employees to return, and 2) universal basic income because tens of millions of Americans will get accustomed to receiving money for nothing.
These policy priorities are just two more steps in Democrats’ efforts to socialize the economy further. Call it the Seattleization of the country.
Americans only need to look to the People’s Republic of Seattle to look at the real-world nightmare of Democrats’ progressive dreams. Tax, regulate, and all sorts of progressive policies have driven out small businesses and brought in homelessness and crime. Last year, the Seattle news affiliate KOMO produced a viral video called “Seattle is Dying,” which has racked up 7.4 million views on YouTube. It largely blames the city’s problems on progressive local governance.
Seattle’s City Council is made up of all stripes of Marxists and leftists, including Trotskyist Kshama Sawant, who calls for the nationalization of Microsoft, Boeing, and Amazon. The council foreshadows what a President Biden cabinet would look like. Think Elizabeth Warren as Commerce Secretary, Alexandra Ocasio-Cortez as Energy Secretary, and Richard Trumka as Labor Secretary. The policies that have ruined Seattle would metastasize throughout the country.
Under such an administration, perpetual $600 weekly federal government payouts would amount to mere table ante for the big bets on socialist policies to come.