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Stimulation-Palooza: Temporary Tax Rebates, Permanent Jobless Benefits
Bad medicine.
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Two days ago, I highlighted the Senate push for cramming extended unemployment benefits into the economic stimulus package.

A House Ways and Means staffer today sends along the following sheet that underscores the permanent nature of “temporary” jobless benefits.

So, the tax rebates will be temporary. The unemployment benefits last forever.

Press on, Washington, press on:

“Temporary” Extended Unemployment Benefits?

History Tells a Different Story

The House on January 29, 2008 passed a bipartisan economic stimulus bill that did NOT include provisions to extend unemployment benefits. However, the Senate Finance Committee (SFC) has decided to add a “temporary” extension of unemployment benefits to its version of this legislation.

But does “temporary” really mean this program will operate only “through the end of 2008,” as the legislation’s proponents suggest? Looking back at the history books reveals a different story – of past “temporary” unemployment benefit programs that were repeatedly extended, operating for years and costing tens of billions of dollars more than originally expected.

Unemployment benefit program 1991-1994

Original proposed program length: 8 months

Original estimated cost $7 billion

Actual length: 29 months

Actual cost: $39 billion

Number of extensions: 5

Unemployment rate at start of program: 7 percent

U rate at end: 6.4 percent

Unemployment benefit program 2002-2004

Original proposed program length: 10 months

Original estimated cost $9 billion

Actual length: 29 months

Actual cost: $26 billion

Number of extensions: 2

Unemployment rate at start of program: 5.7 percent

U rate at end: 5.8 percent

Unemployment benefit program 2008

Original proposed program length: 11 months

Original estimated cost $10 billion

Actual length: ? months

Actual cost: ? billion

Number of extensions: ?

Unemployment rate at start of program: 5 percent

U rate at end: ?

1. SFC documents suggest the “temporary” extended unemployment benefits program would operate only through CY 2008 and cost $10 billion. But these sorts of programs never work out that way.

a. CRS reports that no “temporary” extended benefits program created since 1970 has expired without being extended.

b. Programs created in the 1980s and 1990s were extended 6 and 5 times, respectively.

c. The prospects a temporary program created today will expire at the end of 2008 as the SFC proposes – with the window of eligibility shutting two days after Christmas – is both dubious and would be without precedent in the last generation.

2. Even if it operated only as long as the “average” program created since 1980, a “temporary” program created now will be paying extended benefits in mid 2010.

a. The average duration of extended benefits programs created since 1980 is 30 months.

b. If a program started in February 2008 and paid benefits for 30 months, the final payments would be made in July 2010.

c. The total cost of such a program would likely be $30 billion or more.

3. If prior extended benefits programs began when the national unemployment rate was as low as 5.0%, these “temporary” programs would have operated for decades.

a. The U.S. unemployment rate was 5.0% or higher in every month between January 1974 and April 1997 – more than 23 years in a row.

b. Today’s 5.0% rate is below the average of the 1970s, 1980s, and 1990s.

c. During the Clinton Administration (1993-2000), the average unemployment rate was 5.2%.


d. According to a 2007 report by the Congressional Budget Office, today’s 5.0% unemployment rate is the same as the “natural rate” CBO will use “both currently and for the 10-year projection period through 2017.” Put another way, according to CBO today’s unemployment rate is “normal” not “high.”

e. Creating an extended benefits program now will create a precedent to repeat this action every time the unemployment rate reaches this historically modest level. That will cost billions of dollars and encourage more and longer unemployment.

(Republished from by permission of author or representative)
• Category: Ideology • Tags: Subprime crisis