Extend Unemployment Benefits? Politics Versus Economics
By Randall Holcombe • Wednesday July 14, 2010 11:56 AM PDT •
Unemployment benefits normally can be collected for 26 weeks, but currently they can be collected for up to 99 weeks in certain hard-hit areas. The House of Representatives has approved the continuation of extended benefits, but Senate Republicans have, so far, kept the extension from passing the Senate.
One can argue the merits of extending unemployment benefits, but a basic economic analysis will show that if you pay people not to work, more people will remain out of work and unemployed. The unemployment rate will fall faster if unemployment benefits are not extended.
The positions Democrats and Republicans have taken on the extension fits the stereotypes of the two parties. The Democrats support transfer payments to unemployed individuals down on their luck; the Republicans oppose the extension because it will increase the deficit, slow the decline in unemployment, and slow the economic recovery.
This being an election year, and with Congress and the White House being controlled by Democrats, the political logic would seem to point toward the parties taking the opposite stance. It is well-known that the incumbent party tends to do worse in poorer economic conditions. So, the Democrats should want the unemployment rate to fall, and should be opposed to an extension of unemployment benefits for that reason. Meanwhile, Republicans will benefit more at the polls in November if the unemployment rate stays high, so they should support the extension.
I have often argued that politicians tend to put their personal interests ahead of political ideology, but in this case, it would appear that argument is wrong. Democrats, who would benefit from lower unemployment, are supporting the extension of unemployment benefits that will keep unemployment higher, while Republicans, who would benefit from higher unemployment, are opposing the extension.
Are Democrats really so willing to promote their political ideology even when it is apparent it will hurt them in the November elections? Are Republicans really so willing to promote theirs that they will not “compromise” with the other party, in the spirit of “bipartisanship,” and help themselves in November?
Frankly, I’m surprised to see both parties arguing against what appears to be their own interests in trying to capture, or maintain, majority control of Congress.