Unemployment: Who Is The Real Scrooge?

As part of their attempt to pivot away from the ObamaCare rollout fiasco and broken promises as well as a year of scandals and legislative failure, Democrats are following the president’s lead and attempting to highlight income inequality as an issue with which they can hammer Republicans. So it was little surprise that Senator Rand Paul’s statement onFox News Sunday that extending unemployment benefits actually worsens the problem they are intended to solve had the mouths of liberal pundits watering. Washington Post columnist Ruth Marcusjumped on the statement during an appearance on MSNBC during which she gave Paul her “Scrooge of the Year Award.” At Salon, Brian Beutler seemed to do the same thing when he wrote that House Speaker John Boehner and Budget Committee Chair Paul Ryan were being equally heartless by opposing any Democratic attempt to push for another extension of unemployment benefits even as the two parties attempt to negotiate a budget deal.

Both writers cast the issue in simplistic moral terms: Liberals want to give the poor money during the holiday season. Conservatives are playing Scrooge and asking those who want them to pony up a pittance for the needy if they are not better off in workhouses or prisons. Beutler would even like the Democrats to turn the tables on the GOP and threaten a government shutdown over the issue, though he concedes any such conduct is a political loser, even if it allows the left to do a D.C. version of A Christmas Carol.

But though Marcus and the rest of the chattering classes seem to think this illustrates again how hard-hearted Republicans have become, they are wrong. Far from demonstrating loyalty to Mitt Romney’s infamous line about the 47 percent of the country being takers whose votes are bought by liberals, Paul was actually right about the impact of unending unemployment benefits.

As a 2011 COMMENTARY article by Cheryl Strauss Einhorn pointed out, by opposing such measures, Republicans are acting on sound economic and moral principles. As Einhorn writes, by transforming unemployment from a “short-term slave” into an entitlement that operates as a semi-permanent form of welfare, the government is doing more harm than good. Though Marcus assumes that all those on unemployment would take any job rather than stay on the program, the evidence of economic studies has always pointed in the other direction:

No less important than cost is the matter of results. All 10 of the economists interviewed for this article agreed that longer availability of benefits would, in fact, lead to a more leisurely job search. The Heritage study showed that “a 13-week extension of unemployment benefits results in the average worker remaining unemployed for an additional two weeks,” wrote Campbell, Sherk, and Ligon.

A recent study by Denmark’s Economic Council showed that many of those who do not find work right away wait until just before their benefits expire to take anything available. The study argues against lengthy payments, showing that recipients tend not to seek the jobs they could get but rather those they would like to have. The results encouraged the Danes to halve the country’s four-year benefit system, which, like those of other European countries, is more generous than the American one.

This flies in the face of the sort of popular sentiment that Marcus reflected. But as Einhorn discussed, the key to understanding this question is no different than that of other economic issues: incentives.

Indeed, the greatest conceptual lapse in our current unemployment policies results from forgetting the cardinal behavioral rule: incentives matter. As the unemployed conduct a more leisurely search, they lapse into government dependence and strain their connection to the workforce. This has the potential to create a crisis, whose reach goes far beyond the political, or even economic, domain and deep into Americans’ sense of worth.

Arguing against giving the unemployed more money seems harsh. Indeed, as far as liberals are concerned, it is the epitome of Dickensian maltreatment of the poor in which a refusal to spend more in this fashion is the moral equivalent of condemning Tiny Tim to death or the long-suffering clerk Bob Cratchit to a debtor’s prison rather than the goose dinner the reformed Scrooge sends him in the book. But it is of a piece with the same instinct that built a welfare system that served to create a permanent underclass in this country rather than giving the poor the helping hand they needed.

As Einhorn concluded:

According to the Congressional Research Service, workers who have been unemployed the longest are often the last to be hired after a recession. But we do not need research to back up the larger truth of what we have already witnessed. In a free market, nothing compounds a crisis like a well-meaning government, and nothing saps the individual spirit like dependence—under any name.

A sober examination of the question shows that rather than being a modern Scrooge, Paul was right. Democrats want to play Santa Claus and hand out more goodies to the unemployed. Doing so may even be good politics, at least in the short term. But by playing this game, they are doing neither the intended objects of their largesse nor the country any favors.