House-Senate negotiators are close to a modest budget accord to avoid another government shutdown, but suddenly the White House is introducing a last-minute demand. Five years into an economic recovery that President Obama often hails as miraculous, he wants to extend unemployment benefits one more time.

Maybe it's time to consider whether the big expansion of unemployment insurance has increased joblessness. In 2009 the Obama Administration and Congress extended jobless benefits for up to 99 weeks. The point was to help people through the recession, but now the jobless rate is 7%, down from 10%, and the White House still wants another extension.

That would add some $25 billion to the deficit with no compensating economic benefit. The Administration claims that every $1 of jobless benefits creates $1.80 in economic growth, based on the notorious "multiplier" in Keynesian economic models. This is the theory that you can increase employment by paying more people not to work, and that you can take money out of the private economy by taxes or borrowing without cost. If that theory worked, the government should pay everyone not to work.

This also ignores that states and employers are already paying for this supposed free lunch in the form of higher job-killing payroll taxes under the Federal Unemployment Tax Act, or Futa. At least 24 states have been forced to raise this tax since 2010 and the Labor Department says it will rise again in 13 states to repay $20 billion in loans and interest they owe the feds for helping to finance state-funded benefits. This federal tax is applied to 0.6% of a worker's first $7,000 of annual wages. The rate rises automatically by 0.3% for every year states fail to repay their unemployment insurance loans from Uncle Sam.

In Indiana and the Virgin Islands, the tax will rise next year to 1.8%, or $84 more per worker. In 12 other states the tax rises to 1.2%, or $63 more per worker. This may not seem too burdensome, but it comes on top of state unemployment-insurance taxes that can exceed $3,000 per worker in states like Minnesota, according to the Tax Foundation. The tax is "experience rated" by the feds, meaning that firms in industries with high labor turnover rates—such as hospitality, restaurants, construction and trucking—pay a higher tax.

Some economists believe the unemployment insurance tax is too low to discourage firms from hiring. But if that is the case, why did Mr. Obama enact a payroll tax holiday in 2011 and 2012 as incentive to increase hiring? If lower payroll taxes increase employment, then higher payroll taxes must curtail it. Economist Casey Mulligan of the University of Chicago has found that payroll taxes have a "persistent negative impact" on hiring and real GDP.

Alan Krueger, President Obama's former chief economist, coauthored a 2008 study reviewing the amount of time that unemployed individuals in different states and countries spent looking for a new job and found, among other things, that "job search is inversely related to the generosity of unemployment benefits." Other studies have found that laid-off workers ineligible for unemployment benefits spend more time looking for a new job than those who get checks.

Some smart states have begun to resist Uncle Sam's not-so-free unemployment benefits and loans. While the feds have financed longer unemployment benefits, states in return have had to agree not to cut recipients' weekly payments. North Carolina, for example, was criticized as heartless for scaling back benefits earlier this year. But by doing so Raleigh avoided a payroll tax hike. Uncle Sam's unemployment extension and loans are a sucker's play for states, much as ObamaCare's Medicaid benefits create new long-term burdens.

Economist Martin Feldstein long ago proposed a better plan to create a self-insurance component of unemployment insurance with tax dollars going into an employee trust fund for each worker that could be drawn during a bout of unemployment. Workers could keep whatever money was left over at retirement, which would encourage workers to become re-employed more quickly after losing a job.

Instead the current system provides as much as two years of benefits for not working and raises payroll taxes on employers even as some 20 million Americans are still unemployed, underemployed or discouraged from looking for work. None of this will help the economy create more jobs, which is what the jobless need far more than another government check.