Fratto: Political Football With the Unemployed
With President Obama’s press statement today, bludgeoning Republicans to extending jobless benefits for up to 99 weeks without budget offsets, we’re seeing a familiar game play out in recession politics: political football with the unemployed.
Since the President decided to make the issue his marquee economic message today, it’s probably fair to ask, "What exactly is the Obama Administration’s policy on unemployment benefits?"
The nation’s basic policy on unemployment compensation is to provide an initial 26 weeks of coverage. This is available in all economic times, boom or recession. In addition, depending on individual state unemployment rates, up to an additional 13 weeks of “extended” unemployment insurance benefits may be provided, and an additional 7 weeks during periods of extremely high unemployment. That’s 46 weeks of unemployment benefits. Further extending requires an act of Congress. Since the recession began, Congress has passed a series of extensions to Americans in high unemployment states for up to 99 weeks. The most lengthy extension has expired, and the fight in Congress today is not over whether to restore benefits to 99 weeks, but instead whether and how to pay for them.
Let’s set that battle aside.
I expect extended benefits will be restored soon. Let’s also set aside the President’s silly assertion that stalling benefits is having some impact on US economic growth. I know the White House is casting about for ways to explain slow economic growth, but the numbers involved here are too small, and spread over too long a time period, to be very meaningful.
So, what is the Administration’s actual policy with respect to extending benefits?
The White House hasn’t shed any light, and so these questions remain:
Since we know the unemployment rate in the U.S. will remain high for years, will the White House come back to Congress to extend benefits when unemployed Americans again exhaust the 99 weeks available to them?
At what rate should unemployment benefits be extended? Federal unemployment benefits have generally been extended when the unemployment rate climbed above 7%. Since most economists expect unemployment to remain well above 7% through the end of next year, shouldn’t the Obama Administration outline — and budget for — an eventual further extension of benefits?
How did the Obama Administration arrive at 99 weeks as the optimal length of stay on unemployment? What is magic about that number? Is it too long or too short, and why? I’ve never seen a justification for this length, nor for any other length. Labor economists have a lot to say about the impact of long-term unemployment benefits — however socially and politically necessary they are. It’s not clear that the Administration used any of this research to develop a policy on unemployment compensation, nor for its current push to restore benefits.
Unemployed Americans, states, and businesses would benefit by knowing exactly what the federal policy is — they can plan for it and budget for it. This debate gives us an opportunity to set a policy for dealing with unemployment during lengthy periods of high unemployment. Instead of playing political football, this debate is an opportunity for the White House to lead and set a clear policy we all can live with.
Tony Fratto, a CNBC contributor, is Managing Director of Hamilton Place Strategies – a strategic economic policy and communications firm based in Washington, DC. He is a former White House Deputy Press Secretary for the George W. Bush Administration and Assistant Secretary of the Treasury. You can follow him on Twitter at http://twitter.com/TonyFratto.