A number of conservative economists say that Congress should extend the pandemic boost to unemployment benefits, although at a lower rate, a stance in tension with GOP efforts to allow the program to expire as part of relief negotiations.
The program in question, a flat $600 boost to unemployment benefits, was enacted in the $2.3 trillion March CARES Act coronavirus relief package and is set to expire on Sunday.
Democrats are united in favor of extending the program in order to allow workers sidelined by the pandemic to keep meeting their bills. Many Republicans, though, argue that the extra benefits mean that many workers earn more on unemployment than they would from their jobs and that the dynamic will prevent an economic recovery. Conservative economists surveyed by the Washington Examiner, though, said that the risk of paying workers too much money through unemployment benefits is small in the present circumstances.
“The $600 a week federal unemployment benefits is not a major disincentive to return to work at this point,” said Brian Riedl, an economist at the conservative Manhattan Institute.
“The overwhelming driver for people not working right isn’t the unemployment benefits, it’s mostly the lack of jobs available and the fact that it’s not safe to go back to work for many,” said Riedl.
It is true that a majority would receive more money from the benefits, if they’re extended, than from work, according to the Congressional Budget Office.
And some conservatives have argued that, accordingly, the benefit should be discontinued. Stephen Moore, an outside economic adviser to President Trump and a member of his economic recovery task force, said that between 1 to 2 million more people would be employed at the moment if the jobless benefits hadn’t existed over the past four months. Moore is also a contributor to the Washington Examiner.
But economists, generally, say that the bigger problem for hiring is that firms aren’t interested, rather than workers holding out over wages, according to a University of Chicago survey.
And several fiscal conservatives told the Washington Examiner that ending the benefits outright would harm the pandemic-battered economy. “If we let the $600 benefits expire altogether, it will reduce spending in the economy, cause minor contractions, and prevent economic growth,” said Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget, a group that advocates for deficit reduction.
The unemployment benefits have helped to prop up household income for the millions who’ve lost their jobs to the coronavirus pandemic, according to the CBO.
Rather than end the benefit, conservative economists said, Congress should reform the benefit boost so that it matches the severity of the crisis. The economists surveyed by the University of Chicago overwhelmingly said it should be reduced so that it is less than employees would make at work.
“People aren’t lazy and sitting around at home, but the $600 a week is too much, and people aren’t even spending all that money, the savings rate has skyrocketed in the past couple months,” said Rachel Greszler, a research fellow who specializes in labor policies at the conservative Heritage Foundation.
To tie the benefit more closely to the economic conditions at the local and state level, Greszler suggested a partial federal match that would provide an additional 40% of what state-level benefits provide. It would also decline every month and end in December.
Several lawmakers and officials are thinking along similar lines.
Sen. Ron Wyden, a Democrat from Oregon, has put forth a plan to scale back the unemployment benefits after July by tying the added amount to an improvement in the economy. In his plan, every time a state’s three-month unemployment rate average falls 1%, the payment is reduced by $100. It would be eliminated after the jobless rate falls below 6%.
Another option would be simply to reduce the benefit amount, an idea that the Trump administration has entertained. “We’re looking at something that looks like a 70% wage replacement,” Treasury Secretary Steven Mnuchin, who is leading the pandemic relief negotiations on behalf of the White House, said on Thursday.
In contrast, the House Democrats passed legislation extending the $600 payment through January of next year. However, Speaker Nancy Pelosi, a Democrat from California, last week signaled a willingness to be flexible on the payment amount.
Many economists, including liberal ones such as Jason Furman, chairman of the Council of Economic Advisers under President Barack Obama and Timothy Geithner, treasury secretary under Obama, have proposed phasing down the federal benefit by tying it to the specific economic circumstances of individual states, providing a weekly benefit equal to 40% of wages, capped at $400 a week. The benefit would then be scaled down as the unemployment rate fell and eventually eliminated altogether.
