The Corner

Congress Really Can’t Find $6 Billion to Offset the UI Extension?

Yesterday, the Senate agreed to move forward with a three-month extension of expired unemployment benefits for the estimated 1.3 million Americans who’ve been employed. By most accounts, the reason almost all Republicans voted against it was the fact that the $6.4 billion cost of the extension isn’t offset with spending cuts elsewhere in the federal budget. Leaving aside the question of why so many people are still left out of the recovery years after it started and whether or not the extension may be detrimental to the recipients, Congress’s unwillingness to offset the new spending isn’t new. Since 2008, the federal government has spent $265 billion on emergency UI, $210 billion of which hasn’t been paid for. It’s simply been paid for with new federal debt, as has been customary with emergency spending since a Republican Congress let the rule requiring some level of offset expire in 2002. 

Here’s some data from Speaker Boehner’s office:

  • Emergency benefits have been offered only a handful of times – used in the worst economic situations – and are designed to be temporary. The current program was put in place as we entered a deep recession in 2008, a true economic emergency.
  • The recently expired emergency benefits were in place longer (66 months), were extended more times (12), cost more ($265 billion), and added more to the debt ($210 billion) than any previous program.

The cost of the program may not prove to be a dispositive argument against expanding the benefits (at least to those who support the extension) because the extra money may still be a relief to those unemployed. But the case for the extension otherwise is far from rock-solid: For one thing, the idea that unemployment benefits act as economic stimulus has been challenged by economists, and there’s some microeconomic evidence that extended benefits can more or less dissuade people from taking jobs, leading to a permanent erosion of their skills (since they stay unemployed longer) as well as a reduction of their future earnings.

But regardless, the cost of the program should prompt Congress to offset some of the cost of the extension — even if Senator Reid and Representative Pelosi are claiming that there is nothing left to cut in the budget. This claim is particularly  laughable in the wake of the recent and spectacular disability-fraud bust in New York and the repeated news stories about the constant waste, fraud, and abuse that go on in government (see for instance the recent Washington Post stories on a plane that didn’t fly, an airport with no passengers and farm subsidies in Manhattan. And a private industry group’s “spokes-squirrel.”)

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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