Protecting the Jobless

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WASHINGTON -- It's an election year, and partisan acrimony has escalated. Democrats and Republicans portray themselves as the nation's saviors against all the programmatic atrocities of the other side. Can we find a refuge of common-sense agreement amid this self-serving political din? Well, here's a proposal for the economy: Enact a temporary extension of unemployment insurance from the standard 26 weeks to 39 weeks.

The proposal's virtue is precisely its modesty. Benefits have been extended in every recession except one since the 1950s. Although most unemployed usually find new jobs within the normal six months, the task becomes harder in a slump. Perhaps 3 million people will exhaust their benefits this year, estimates the Congressional Budget Office. The cost of added protection is also modest: about $13 billion for a proposal that recently passed the House Ways and Means Committee.

True, it's not yet clear that we're even in a recession. In the first quarter of 2008, the economy's output of goods and services (gross domestic product) increased at a 0.6 percent annual rate. Though meager, that's still growth and suggests the economy doesn't meet one basic test for a recession -- two consecutive quarters of negative GDP. But that verdict comes with a big caveat: The job market is already in retreat.

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Congressional Democrats -- and some Republicans -- have supported an extension of benefits. The Bush administration has resisted, arguing that Congress has never before lengthened the benefits with such low overall unemployment. True. When benefits were extended in early 2002, the unemployment rate was 5.7 percent. In 1991 the extension occurred at 7 percent. But so what?

What's wrong with this argument is that it ignores basic changes in U.S. labor markets. Over the past two decades, American businesses have gradually toughened their hiring and firing policies. In recessions, they resort more to permanent dismissals as opposed to temporary layoffs; in recoveries, they're more cautious in adding new workers. After the 2001 recession, payroll employment didn't reach its prerecession peak for more than three years.

It's harder to find a new job. Average spells of unemployment have slowly lengthened. The increase since 1960 has been about six weeks, estimates economist Gary Burtless of the Brookings Institution. "It's more likely you'll exhaust your benefits today than in the 1950s and '60s," he says. In a slump, the share of those unemployed for more than six months typically rises to a fifth or more.

Congress ought to send the president a stand-alone extension of unemployment benefits. It would be hard to veto. Compared with the $152 billion price tag on the economic stimulus program earlier this year, the cost is slight.

But this may be a fantasy. Democrats may add the extension to an expensive extravaganza of other spending increases (construction projects, grants to states) and tax breaks labeled "Stimulus II." The whole package would aim to show that Democrats care about the economy and Republicans don't. It could become easily mired in partisan politics, going nowhere and demonstrating again the long odds against common sense.

http://www.realclearpolitics.com/articles/...he_jobless.html