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Stimulation-palooza: Why are we extending unemployment benefits?

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By Michelle Malkin  •  January 29, 2008 11:45 AM

The House will vote later today on its borrow-and-spend rebate deal. The Senate is pushing the inevitable lard-up. Democrats and Republicans alike want an extension on federal unemployment benefits. Regular state unemployment insurance covers 26 weeks.

Several GOP senators backed the proposal to extend unemployment payments for 13 weeks for those whose benefits have run out, with 26 more weeks available in states with the highest jobless rates…

“Many of these additions have bipartisan support, and I hope that the president will recognize that the White House needs to negotiate with the Senate as well as the House,” said Sen. Susan M. Collins, R-Maine, who backs both the rebates for seniors and the unemployment extension.

Sen. Olympia J. Snowe, R-Maine, a Finance Committee member, called the unemployment extension “critical” and said she supported ensuring that the rebates reached the elderly.

A program intended to be a safety net has become an excuse for people to remain unemployed once they lose a job by discouraging job search activities until benefits are almost exhausted.

Even the Clinton administration apparently understood the perverse consequences:

Sen. Charles Schumer and other senate Democrats are threatening to hold up the legislation unless it includes extended unemployment benefits. They claim that this is the most important part of the stimulus package precisely because it will help those who are neediest, who are most likely to spend their money because they are the neediest. But this has even less to do with “stimulus” than the $300 checks.

The Democrats may convince some that they are pushing for this out of “compassion,” though they never once advocated longer or greater unemployment insurance benefits during Clinton’s administration despite an average unemployment rate that was higher than the 5 percent rate that we face now. The most likely reason is simply politics. They know that extending unemployment benefits will increase the unemployment rate, thus making it easier for Democrats to use the economy as an election issue.

Dozens of economic research papers indicate that when you extend or increase unemployment benefits, you lengthen unemployment, because recipients wait until their benefits have been exhausted to take their next job. Even the economists who advise the Democrats know this. Larry Katz, the chief economist at the Labor Department during the Clinton administration, co-authored a study that found that workers are almost three times more successful in finding jobs when benefits are just about to run out.

So what will increased unemployment do? It will reduce production. Exactly the opposite of what the “stimulus” package claims to do.

I repeat: God save us from bipartisanship.

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