Politics of Jobless Claims: Is Two Years of Benefits Too Much?

Tea Party candidates suggest cutting benefits.

June 30, 2010, 2:17 PM

July 1, 2010 -- Here's something Capitol Hill lawmakers in both parties generally agree on: With the jobless rate near 10 percent and the economy only sputtering toward recovery, unemployment benefits should be extended beyond the 99 weeks -- or nearly two years -- that state and federal benefits currently last in the hardest-hit states.

But out on the campaign trail, it's a different story -- some insurgent Republican candidates with libertarian streaks are arguing to scale back -- not extend -- the benefits.

In Nevada, where the unemployment rate is a staggering 14 percent, Senate candidate Sharron Angle told journalist Jon Ralston in a local TV interview Tuesday that unemployment benefits discouraged people from looking for work.

"The truth about it is that they keep extending these unemployment benefits to the point where people are afraid to go out and get a job because the job doesn't pay as much as the unemployment benefit does," she said, even though most people on unemployment receive less than 40 percent of their previous wages. (The maximum benefit in Nevada is $362 a week, far lower than the median household income there, which is more than $56,000.)

In Kentucky, where the unemployment rate is 10.2 percent, Republican Senate candidate Rand Paul told a radio interviewer that the unemployed were essentially getting "handouts."

"As bad as it sounds, ultimately, we do have to sometimes accept a wage that's less than we had at our previous job in order to get back to work and allow the economy to get started again," Paul said. "Nobody likes that, but it may be one of the tough love things that has to happen."

Lawmakers Mull Over Ways to Stretch Unemployment Benefits

In the halls of Congress, though, the sticking point remains not whether to extend but how to extend unemployment benefits.

A partisan morass has stymied action. Democrats, for the most part, argue that during an economic emergency, unemployment benefits should be extended without making other budget cuts. Republicans, believing the $33 billion six-month extension would add to the national debt, want to offset the cost of extended benefits.

An estimated 1.2 million workers -- who have all been out of work for more than six months -- started to exhaust their benefits in early June. Their numbers could snowball in July as more long-term unemployed exhaust benefits, according to the National Employment Law Project.

"Both sides have offered ways to address the programs in this bill that we agree should be extended," said Senate Minority Leader Mitch McConnell on the Senate floor Tuesday. "The only difference is that Democrats are demanding that we add the cost to an already unsustainable $13 trillion national debt."

Democrats, for their part, have accused Republicans of abandoning the unemployed at a time of great need. And they say Republicans, by insisting that the more than $30 billion cost of extending unemployment benefits be taken from other programs, are essentially opposing them.

"People say, 'With this deficit, how can you add to it?' The best way to get out of our deficit is to put people back to work," said Sen. Dick Durbin, the No. 2 Democrat in the Senate.

In normal economic times unemployment insurance lasts 26 weeks. But since 2008, Congress has periodically extended benefits so that the benefits, when added to state unemployment insurance programs, can run for 99 weeks or longer in the 28 states hardest hit by the recession.

But James Sherk, a senior policy analyst in labor economics at the conservative Heritage Foundation, said 99 weeks is too long.

While Sherk does not believe Congress should undo the current extensions ("pulling the rug out from under people is not good policy," he said), he does believe that 99 weeks of benefits can discourage people from looking for work or making necessary compromises, such as moving or changing industries.

How Long Is Too Long to Collect Unemployment?

Unemployment insurance can, said Sherk, "delay the recognition of reality."

He points to the construction industry as an example. It's not likely that housing construction will return to its pre-2008 levels anytime soon, if ever. And the sooner that out-of-work construction workers move to new types of employment, said Sherk, the better for them and the economy.

Sherk would like to see the government cap emergency unemployment benefit levels at 60 weeks -- a little more than a year -- instead of the nearly two-year current level, or the 2½ year level Congress is considering. The average worker, he explained, even with today's persistently high jobless rate, finds work within about 34 weeks of losing a job.

But all those arguments ignore the problems that any given unemployed worker might face, said Judy Conti at the National Employment Law Project.

"Its not a matter of them exhausting benefits and just settling. There's nothing to settle for," she said, adding that there are more unemployed people than jobs available. And even if a person wanted to pick up and move to another state to find work, she said that would be a tough thing to do after six months or a year of unemployment.

"If you've been unemployed for a year you don't have the money to just pick up and move," she said.

Conti also argued that federal unemployment benefits stimulate the economy, as unemployed people use them to pay their mortgages, buy gas and groceries, not save, she said.

Peter Morici, an economist and professor at the University of Maryland, doesn't believe the economic stimulus argument applies anymore when it comes to unemployment benefits.

"If you take medicine and it doesn't work," he said, "and then you double the dose and it still doesn't work, do you take it again?"

ABC News' Dan Arnall contributed to this report.

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