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Automatic for the People

Jeffrey B. Wenger One of the saddest lessons of this recession is that the United States has no adequate response for rising long-term unemployment. Contrast this with our policy for combating inflation: the Federal Reserve can always reduce the money supply, no Congressional approval required. There isn’t a comparable mechanism to create jobs or to protect the long unemployed, no contingency plan that kicks in whenever job losses continue to mount. During this recession, the Fed has tried to fight unemployment by cutting interest rates, but cheap money that no one wants to borrow is not an employment policy. After all, few businesses want to expand and hire new employees, given weak consumer demand. And though priming the pump with government money is the best way to increase demand, Congress has been reluctant to spend enough to set the economy on the right course. Then there’s the problem of unemployment benefits: Congress must vote on every extension and, with the latest impasse between Senate Republicans and Democrats, more than three million out-of-work Americans could lose their benefit payments by the end of the month. In the worst job market in decades, families won’t have money to buy food and maintain health coverage, to keep up with mortgage payments and credit card bills. It wasn’t always this way. In 1970, Congress passed the Federal-State Unemployment Compensation Act, which established an automatic trigger: whenever unemployment increased to a certain point at a national or a state level, benefits were extended by 13 weeks. The costs of these benefits were shared by the states, which paid them out of their regular unemployment insurance accounts, and the federal government, which increased taxes by about $8 per worker. In the ’80s and ’90s, however, Congress diminished the effectiveness of the program by eliminating the national trigger, raising the state triggers and altering the trigger calculations in such a way that they hardly ever took effect. As a result, unemployed Americans now have to wait and worry as lawmakers debate each extension. Fortunately, there is a simple solution: set up a new trigger. Heather Boushey from the Center for American Progress and I have proposed that whenever a state’s total unemployment rate rises above 6.5 percent or jobless claims increase by more than 20 percent, benefits should be offered for an additional 20 or more weeks. This program should be fully financed by the federal government, thereby alleviating states’ burden during the recession. An automatic trigger would provide a tailored response to those states with the worst labor markets and eliminate the need for Congress to revisit this issue every few months. Most important, we could reduce some of the uncertainty for the jobless. Jeffrey B. Wenger is an associate professor of public policy analysis at the University of Georgia School of Public and International Affairs.

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