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Jobless benefits don't cause unemployment

By John Stoehr
updated 4:36 PM EST, Tue January 21, 2014
STORY HIGHLIGHTS
  • John Stoehr: GOP uses North Carolina's lowered jobless rate in unemployment debate
  • He says rate fell after benefits slashed. GOP argues benefits make people turn down jobs
  • This gives GOP cover for not extending jobless benefits, he says. But it masks economic reality
  • Stoehr: N.C. rate reflects people no longer looking for jobs. Where is GOP's solution?

Editor's note: John Stoehr is managing editor of the Washington Spectator.

(CNN) -- The Republicans appear to think North Carolina has the answer to their latest conundrum: how to sidestep growing calls for extending unemployment benefits for the 1.3 million Americans who depend on them without looking like uncompassionate conservatives. A measure to renew Emergency Unemployment Compensation died in this Senate last week and it's unclear, given that Congress must now focus on a spending bill, when senators will revisit the bill.

Last year, North Carolina's jobless rate fell to a five-year low after Gov. Pat McCrory and the Republican-controlled legislature slashed unemployment benefits. The reason for this, wrote Diana Furchtgott-Roth, a former economist for the George W. Bush administration, is that unemployment is "intricately linked to the length of unemployment benefits."

"If the unemployed have a source of income," she wrote in Politico, "they are more likely to turn down lower-paying jobs -- even though they are losing job skills by remaining out of the labor force. The longer the unemployed are out of work, the more their skills atrophy. It is a vicious cycle leading to more long-term unemployment, a characteristic of this recession."

This formulation achieves two things. One, it provides an economic rationale for resisting benefit extension: Jobless insurance discourages people from taking available work. Two, it provides a moral rationale: Discontinuing jobless insurance is the right thing to do. As U.S. Sen. Rand Paul, R-Kentucky, noted in the Lexington Herald-Leader: "You could argue that conservatives who argue for shorter unemployment benefits actually have more concern for the worker than liberals who believe in no limits. Conservatives want to get every able-bodied person back into the work force."

While there's little doubt that Paul wants "every able-bodied person back in the work force," there is ample reason to believe he and others have it upside down and backward. Jobless insurance isn't a cause of unemployment. That's caused by an economy that, on its own, would take more than seven years, by one estimate, to return to pre-2008 levels. What's more, Paul's clumsy attempt to retake the moral high ground reflects another puzzle that no Republican or Democrat has thus far faced: How can we continue to promote the values of freedom, hard work and self-reliance when even a full-time job isn't enough to get by?

There's one aspect that Furchtgott-Roth omits, and it's a whopper. Indeed, as she noted, some overqualified people surely settled for low-wage, no-benefit jobs after Raleigh cut their jobless insurance. But the more important reason why North Carolina's unemployment rate went down is plain to see: People stopped looking for work. More precisely, they stopped being counted.

O'Malley: Extend unemployment benefits
Restoring unemployment benefits held up
Fight on extending unemployment continues

According to the Department of Labor's most recent jobs report, the U.S. economy added far fewer jobs than expected (74,000 compared to 200,000) but the unemployment rate fell. Why? Because of something called the "participation rate." That's the Labor Department's best guess measure of the number of those who are currently working and those who are looking for work. December saw the lowest participation rate in four decades.

A low employment rate may be good for politics (making the rounds is an impressive graph depicting a thin blue line dramatically falling over the course of President Barack Obama's time in office). But a low participation rate is bad for the economy and for everyone. It suggests an array of social ills, like millions of educated young people who can't get their lives started.

But it also comes at a time when in Washington the need for balanced budgets trumps the need for jobs, and when all the tools used to counteract the panic of 2008 -- including "the stimulus," food stamps, unemployment benefits and the Federal Reserve's monthly infusion of $80 billion -- have expired or are expiring. This year may reveal just how bad the real economy is.

The Republicans no doubt fear that if they agree to an extension of unemployment benefits, or compromise on any safety net program, that they won't get the credit. The Democrats will. And unlike the Democrats, who would be rewarded in this year's midterm elections, the Republicans would be punished by voters who believe welfare is, as one congressman put it, "legalized plunder." Such is the price for politicizing formerly nonpartisan economic issues.

But the Republicans face a philosophical conundrum as well as a political one. As Senator Paul noted: "The Republican Party has always proposed ideas of less government and more freedom." But if the economy on its own is incapable of creating the 7.4 million jobs needed to return to "normal," what does such a formulation mean? In terms of the long-term unemployed, it means less government equals less freedom, a lot less.

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The opinions expressed in this commentary are solely those of John Stoehr.

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