Creating an Automatic Unemployment Insurance Extension System
Thursday, July 29, 2010 at 11:40 am
Over at The National Review, Josh Barro has a good blog post on extending the unemployment insurance system during sustained periods of high joblessness.
I am inclined to favor further extension of UI benefits while the job market remains so weak. I am not concerned that this leads us down a slippery slope to permanent, indefinite unemployment benefits (which historically have been one of the drivers of high structural employment in continental Europe) as the United States has gone through many cycles of extending unemployment benefits in recession and then paring them back when the economy improves, under both Republican and Democratic leadership.But we could eliminate these fears by making UI adjustment an automatic, rather than political, process. I haven’t seen any specific formulas proposed (if a reform is on the table, readers, please alert me) but in general UI should be extended when unemployment is high and/or rising, and contracted when it is low and/or falling. A formulaic adjustment program could mimic what Congress habitually does already, but without generating market uncertainty — or incurring risk that Congress will be too timid to pull the trigger on abbreviating UI benefits in recovery.
This is a great idea, and one that I know Democratic and Republican staffers both would love to put in place — if for no other reason than because the jobs bill and benefits extensions have taken up hundreds of hours of negotiating time and scores of hours of Senate and House floor time.
The question, I think, might be the funding mechanism. The eight-month fight for unemployment benefits has centered on the question of how to pay for the benefits, or whether to pay for them — not whether to extend them.
There is already some precedent in place. Generally, Congress has started to roll back federal unemployment benefits when the national unemployment rate drops below 7 or 6.5 percent — a line that might demarcate whether unemployment extensions should count as “emergency spending” or need to fall under paygo rules. One could imagine a good bill stating that extended unemployment benefits do not need offsets if unemployment is over 8 percent, need partial offsets between 6 and 8 percent, and need full offsets below 6 percent. But the fight over those lines in the sand, I think, might be tremendous and even prohibitive.
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