Should Congress Have Extended Unemployment Benefts?

President Obama signed the unemployment extension into law shortly after it clear both the House and Senate on 7/22/2010.

States may now immediately begin the process of disbursing funds, estimated to take between two and four weeks. The legislation restores federally extended benefits — tacked on to state benefits, which last up to 26 weeks — retroactively to June 2 and on to Nov. 30. The maximum number of weeks of benefits is 99.

That’s the news and no matter how you may feel, it’s a fact of life.

But should Congress have passed an unemployment extension? I’m sure many of you are thinking, “Of course they should have, unemployment is through the roof; what’s the matter with you?” Believe it or not, there were some in Congress that thought passing this extension was a bad idea.

One argument went that extending unemployment only encouraged people to stay home and not bother looking for a job. There’s even a study that proposes such: “According to a Journal of Public Economics article, every week a jobless person gets unemployment benefits, increases the length of their unemployment by 1 to 2 days.”

The Wall Street Journal was even kind enough to print a chart for us:

In a New York Times editorial, Paul Krugman explained why this argument is dead wrong:

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

The other main argument is that this benefit extension will result in an almost $34 billion increase in the $1.4 trillion deficit and this should be avoided.

According to Debra J. Saunders, “Sen. John Thune, R-S.D., had proposed paying for an earlier (and costlier) iteration of the bill by rescinding $38 billion in “unobligated” stimulus money and imposing an across-the-board cut of 5 percent on non-defense government agencies. His measure failed. Sen. Tom Coburn, R-Okla., proposed paying for the measure “with $40 billion in cuts (reducing unneeded government printing, cutting non-essential government travel, and eliminating bogus government bonuses) and revenue raisers (selling unneeded government property and collecting unpaid taxes from federal employees).” Destined to fail.”

President Obama countered this argument by dismissing GOP concerns as partisan game-playing. The President argued that historically this sort of legislation was treated as an emergency expenditure and saw no reason to change that. Lastly, he portrayed Republicans as hypocrites for demanding that jobless benefits be paid for but not applying the same standard to their call for an extension of Bush Administration tax cuts that will expire this year.

So there you have it. One side says paying people not work only results in people not looking for work and that jobless benefits will add to the federal debt. The other side says, this is an emergency expenditure and is needed to help people in tragic circumstances. Also that stuff about paying people not work is nonsense.

What do you think? Based on the above arguments and whatever else you may add to the discussion, should Congress have extended jobless benefits?