WSJ Uses Positive Jobs Report To Push GOP Toward Unemployment Benefits Cut
Blog ››› ››› ELLIE SANDMEYER
The Wall Street Journal used a positive jobs report to urge Republican lawmakers to block an extension of unemployment benefits, ignoring the ongoing need for extended benefits and the harm that cutting them would have for the ongoing economic recovery.
A December 6 Journal editorial highlighted the Bureau of Labor Statistics' (BLS) November jobs report which found that the "jobless rate hit 7% in November" and that "nearly every statistic pointed in a stronger direction." The Journal used the news to push Republican policymakers to reject a proposed extension of the Emergency Unemployment Compensation (EUC) program, concluding that the positive news "underscores that Republicans should hold fast against another expansion of federal jobless benefits," and claiming that jobless benefits have not been shown to have a positive economic effect:
The November report also underscores that Republicans should hold fast against another expansion of federal jobless benefits. Democrats and the White House want to include this in a House-Senate budget despite a cost of as much as $25 billion that would go straight to the deficit.
Their amazing economic rationale is that every $1 in jobless benefits yields $1.80 in higher GDP. This is the famous Keynesian "multiplier" that didn't work in the 2008 or 2009 stimulus binges. The basic argument is that if the government pays more people not to work, then more people will end up working. If you believe that, you probably also think ObamaCare will shrink the deficit.
But despite the positive jobs report, the need to extend unemployment benefits remains high. In a November 7 report, the Economic Policy Institute found that the "ratio of unemployed workers to job openings is 2.9-to-1, as high as the highest the ratio ever got in the early 2000s downturn," [emphasis original] making the extension "[a]bsolutely" necessary." It noted that congressional failure to extend the benefits would have a devastating macroeconomic effects, resulting in the loss of "roughly 310,000 jobs that would be supported by continuing UI benefit extensions through 2014," -- a loss that would increase the overall unemployment rate by around 0.2 percentage points. In an email to The New York Times, JPMorgan Chase chief United States economist Michael Feroli stated that failure to extend UI benefits "could shave 0.4 percentage point off growth in the first quarter next year."
Extending unemployment benefits does not create a disincentive to work, especially during periods of high unemployment. The Center on Budget and Policy Priorities (CBPP) called such claims "seriously overblown, especially in the current jobs slump." As the CBPP noted in November, "arguments that emergency UI benefits are an important contributor to today's high unemployment have cause and effect backwards" [emphasis original] and "EUC benefits help create that additional demand and contribute to job creation." The November EPI report similarly disputed claims that extended unemployment benefits encourage unemployment:
In the two most careful studies available on the effects of UI extensions on job search in the Great Recession ... both find a very small increase in the duration of unemployment arising from the extensions, but they find that this is primarily because workers who receive UI benefits are less likely to simply give up looking for work.