For our October Readers’ Review: a novella that became an instant classic when it was written nearly two centuries ago. It is the ghostly tale of a lanky loner and a headless horseman. Some even call it the first American horror story. Join Diane and her guests for a discussion of “The Legend of Sleepy Hollow” by Washington Irving.
The Senate cleared a procedural hurdle yesterday on a federal budget compromise. Final congressional approval is expected and could come as early as today. But many Democrats are upset that the budget does not include an extension of unemployment insurance. That means 1.3 million Americans will stop receiving unemployment payments three days after Christmas. Some Democratic lawmakers are pushing a plan to extend the benefits, which they say are a financial lifeline for many families. Opponents argue that an extension would hurt the economy and discourage people from seeking work. A discussion of federal emergency jobless benefits and what’s at stake.
- Fawn Johnson correspondent, National Journal.
- Rep. Sander Levin Democratic U.S. congressman, representing Michigan's 9th District; he's the ranking member of the House Ways and Means Committee.
- Chris Edwards economist and editor of DownsizingGovernment.org, Cato Institute.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Congress appears on its way towards passing a federal budget. But the bipartisan deal would leave more than a million Americans without unemployment benefits when they expire Dec. 28. Republicans do not want to extend the benefits, saying they encourage unemployment and are bad for the economy. A group of Democratic lawmakers has a plan to restore jobless payments. Joining me to talk about the plan and what's at stake, Chris Edwards of the Cato Institute and Fawn Johnson of National Journal Magazine.
MS. DIANE REHMJoining us from the studio in Detroit, Mich., Congressman Sander Levin of Michigan. I invite you to be part of the program. Give us a call, 800-433-8850. Send us your email to firstname.lastname@example.org. Follow us on Facebook or Twitter. If you are now unemployed, I'd especially like to hear from you and to know what the cut-off of benefits might mean for you and your family. And welcome to all of you.
MS. FAWN JOHNSONGood morning.
MR. CHRIS EDWARDSThank you.
REP. SANDER LEVINGood morning.
REHMGood to see you both, and, Congressman, welcome to the program.
REHMFawn Johnson, I'll start with you. Tell us briefly the arguments for and against extending those unemployment benefits.
JOHNSONYeah, it's interesting, Diane. There are some very good economic arguments for extending benefits for long-term unemployed. These are people who have been out of work for more than six months. The Congressional Budget Office estimates that it would put something like 200,000 people back to work because of a quick stimulus to the economy. Keep in mind that these checks that go out to unemployed people are spent almost immediately. So it's a real quick short-term boost to the economy, which the CBO says could actually boost the GDP by .03 percent.
JOHNSONSo it's a modest increase in the now sort of recovering but still shaky economy. The other argument for extending the long-term benefits is that there are 1.3 million people who are currently receiving them who will not be receiving them as of Dec. 28. And that's a pretty harsh cut-off for people. Particularly if they've been unemployed for a long time, it's much harder for them to find work. The White House estimates that that number could go up to 3.6 million by the end of the year. So there's a lot of people who could be helped if they were allowed to continue these benefits.
JOHNSONBut there are some arguments against extending the program, namely, costs. To extend the program for a full year would cost about $25 billion over 10 years. That's not a small sum considering that the House and Senate, Republicans and Democrats, just recently agreed on a modest budget deal that is about three times that. And that took a lot of pandering and three years of just complete and utter chaos on the Hill to get to that point. Twenty-five billion is something that Republicans would like to see offset if they want to have it extended.
JOHNSONAnd they don't want the deficit to be hurt by it. The other argument is that, when you extend unemployment benefits, it does decrease people's ability to go back to work by a modest amount. Now, this is -- some economists put the numbers higher than others. And Chris will probably talk about that a little bit later.
JOHNSONBut I talked to some Republicans on the Hill yesterday, one of whom -- Ron Johnson, who is a conservative from Wisconsin was telling me that he had a constituent begging him not to extend the long-term benefits because he couldn't get employees for a house-painting business that he had. So that's a real effect. The CBO says that the long-term effect is actually a net positive, but you do have to take into account that there will be fewer people going out and getting work if they're still getting benefits.
REHMFawn Johnson of National Journal. To you, Congressman Levin, how do you think eliminating the extension of benefits could affect the jobless and the economy? I was so interested to hear Sen. Rand Paul say that continuing the unemployment benefits after 26 weeks actually does a disservice to these workers.
LEVINI think he should go out and talk to those who are unemployed. We're talking about long-term unemployed, those unemployed for more than 26 weeks. We have never eliminated the emergency program, never, when the long-term number was this high -- never. So we're talking about 1.3 million people who are looking for work, out of work through no fault of their own. And what are we saying to them three days after Christmas -- 1.3 million.
LEVINThey lose 100 percent of their unemployment insurance. The Census Bureau said that in 2012 alone, unemployment benefits lifted 2.5 million people from poverty, and since 2008, over 11 million people. And what's going to happen? In Michigan, they sent out the notice. It's going out today. And I'm just going to read this quickly.
LEVINIt says, "The agencies listed below may be able to assist you when your unemployment benefits end. Healthcare resources..." -- they say whom to contact -- "...family support..." -- whom to contact -- "...foreclosure assistance..." -- whom to contact -- "...utility bill payment assistance..." -- whom to contact -- "...food assistance..." -- whom to contact -- "...educational assistance..." -- whom to contact. Essentially what we're saying to people looking for work, you're totally out in the cold, 1.3 million immediately and another 1.9 million estimated the first six months of next year.
LEVINI think in terms of the economic impact -- I was talking to Mark Zandi of Moody's this morning. And he says, if we don't extend it, it will essentially diminish GDP by two-tenths of 1 percent. So there is the overall economic argument. I think on balance it's best to extend these benefits in terms of the overall economy. But for 1.3 million individuals, this is essentially an economic hurricane that's coming at them.
REHMCongressman Sandy Levin, he's a Democratic Congressman representing Michigan's 9th District. He's the ranking member of the U.S. House Ways and Means Committee. Turning to you, Chris Edwards, I know you oppose extending unemployment insurance benefits. Tell us why.
EDWARDSWell, a number of reasons. One is, I mean, the economy has long been out of recession. We've actually been out of recession now for over four years. The economy is growing again. The unemployment rate has dropped now to 7 percent nationally. So the unemployment rate is getting down to more of a normal level.
EDWARDSYou know, a basic rule of economics is there's no free lunch. This extension will cost another $25 billion, which would be yet more cost thrown onto future generations with higher deficits. Fawn is right that economists, they look at microeconomics of extending unemployment insurance. It does induce people to stay unemployed longer. It tends to push up the unemployment rate.
EDWARDSAnd I think both the Congressman and Fawn mentioned the extraordinarily high long-term unemployment rate right now. That is partly driven by these extraordinarily lengthy benefits. I mean, Harvard's Robert Barro, for example, has argued that we have seen such a high level of long-term unemployment during this recession because of the extraordinary length of the unemployment benefits that have allowed people to say unemployed that long.
EDWARDSIf you cut off unemployment benefits, people have to make tough decisions. There's no doubt about it. They have to maybe take a lower paying job. They have think about changing careers or moving to find jobs in other places and cities where there are more jobs. Those are tough decisions, but there's nothing cost-free here.
EDWARDSThe CBO says that the extra spending will help the economy now. But when we raise the taxes to pay back the debt in the future, we'll get less jobs. So if we spend 25 billion extra now, if you think that helps the economy, when we pay back the 25 billion in the future, that's going to hurt the economy an equal amount. So there's nothing free here. This has a cost.
REHMChris Edwards, he's an economist at the Cato Institute. He's editor of DownsizingGovernment.org. Do join us, 800-433-8850. Fawn Johnson, from what Chris said, from what the Congressman said, sounds as though there may be conflicting CBO studies. Where do they come out?
JOHNSONWell, the CBO is not conflicted. What the CBO says is that there is a modest decrease in the amount of people going back to work as a result of having unemployment benefits. They actually don't put a number on it, but, as Chris was saying, some economists put the number as high as a 1 percent increase in unemployment because of extended benefits. But keep in mind that economists debate this back and forth.
JOHNSONWhat the CBO comes down on the side of is saying that the actual economic benefit of the cash influx -- so this is not necessarily people getting back to work. This is just what happens to the basic economy. You get your unemployment check. You spend it. And when you spend it, then hopefully the economy starts to get a little better and employers are more willing to go out and hire these people.
JOHNSONSo that's where the CBO is. But keep in mind the CBO doesn't always ring all that true among Republicans on Capitol Hill. They have worried about government spending, and they have questioned almost everything that has been done by traditional Washington for the last 10 years. And so…
JOHNSONIncluding CBO. So I think, you know, it's important to remember that when you're looking at this, you can't ignore the fact that unemployment benefits do cost some people to not take jobs that they might otherwise take, particularly if those jobs don't pay as much as their unemployment check does. So this would be like a short-term kind of thing.
REHMAnd how much money is the average check for unemployment?
JOHNSONWell, it depends on the state. It depends on how long that you were employed before you were unemployed. But we're looking at somewhere between 200 to $400 a week, not a ton, but something.
REHMFawn Johnson, she's correspondent for National Journal. Short break here. When we come back, we'll talk more, take your calls, your email. I look forward to speaking with you.
REHMAnd welcome back. We're talking about unemployment insurance and whether it will be cut off for the long-term unemployed on Dec. 28. Here's an email from a listener who says, "Unemployment insurance needs to be cut, and those folks will then be motivated to" -- and he underlines this -- "get off the couch and find a job. The jobs are out there. These people with master's degrees who say they cannot find work should go on the government's website. They have lots of openings in a vast array of fields." What do you think about that, Congressman?
LEVINI think the gentleman is so wrong. Look, the economic evidence, we can argue about, but the overwhelming view is that extending unemployment insurance will help the economy. Prof. Chetty of Harvard looked at these studies and said the predominant feeling clearly was it would be a mistake economically for this nation not to extend.
LEVINBut I want to talk about the individual. I've talked to lots of them. You know, when Walmart -- the gentleman from Cato says people have to make hard decisions. Yeah, they need to find a job. When Walmart came to D.C., there were 600 openings, 23,000 applications for 600 positions, and we say to people, get off the couch. These 23,000 people were well off the couch, or they were sending in their applications through the internet.
LEVINAnd so we have the hard facts that people are looking for work. There are three people looking for every job. And simply to tell them to get off the couch, I think, if I might say, it misunderstands the lives of human beings in our country of 1.9 million people who are going to lose 100 percent, 100 percent of their insurance Dec. 28.
LEVINWe've never done that when we've had this high level of long-term employment, never, and we shouldn't start now.
REHMFawn Johnson, what kind of worker most uses the unemployment benefits? Are they mostly low-income, or are they, as our emailer implies, people with master's degrees?
JOHNSONI'm glad you asked that question, and I'm glad I brought the White House Council of Economic Advisor's report on unemployment insurance with me to answer it. They -- this is what the White House says -- and keep in mind there are people who will dispute this. But they say that roughly half of the people who receive extended unemployment benefits have at least some college, including 4.8 million with bachelor's degrees or higher. And then they also say that nearly 69 million people have been supported by extended unemployment, including 17 million children, over the last couple of years.
JOHNSONWhat we should take away from that is that it's not just the low-income, low-skilled workers who are losing their jobs. In fact, I think that what you find is the people who are long-term unemployed are people who have been in jobs that don't exist anymore. And this is part of the churn of the economy that has caused so much pain over the last 10, 15 years.
JOHNSONBut, in particular, the economic downturn really did harm some of these skilled workers in industries either -- you know, they're engineers whose skills are out of date, or they're involved in manufacturing plants that are no longer there. And they are having a hard time adjusting to the new economy. And the longer that you remain unemployed, the harder it is for you to find work.
EDWARDSI would say two points, too. The emailer's question about getting off the couch, I wouldn't put it that way, but there is a personal responsibility issue here. I hope one lesson a lot of American workers have learned from this long recession is that they need more personal savings. They need to save more.
REHMWhere can that savings come from if they're in low-pay jobs?
EDWARDSIf you actually look at savings rates, they actually -- even people of modest income can save, and that's what the data shows. It is a choice. And, you know, one of the long term solutions here -- and this is what the nation of Chile has done -- have gone to a system of personal savings accounts for unemployment insurance. During working years, you save into these personal accounts. You're unemployed. You draw from your own account.
EDWARDSThis would be better than the current system for one reason is that the current system doesn't cover a lot of people. It doesn't cover part-time, temporary workers. It doesn't cover self-employed people. It doesn't cover people who voluntarily quit or were fired. There's a lot of people who are not covered. If we went to a system of personal accounts where you save for your own possible unemployment in the future, everyone would be covered under this simpler system.
LEVINCould I jump in here?
LEVINYou know, we can argue about Chile. They've changed their system at times. But for the 1.3 million, are we going to tell them that, in this nation, there isn't enough saving, so you're going to lose 100 percent of your insurance? I suggest that everybody who says that go to the offices where people are coming in, as I have, and talk to them. An interesting thing is we have sent the facts out throughout this country to newspapers. And the response has been overwhelming.
LEVINThey have put stories on the front pages, and people have responded with their stories. We're talking about people who are desperate. Someone said to me yesterday at an unemployment workforce office, what do they want me to do? There are 1.3 million fewer jobs today than the recession began. So what are we saying to these people?
LEVINWe need a new system? Is that the answer to people who are going to fall into poverty, who are going to lose their homes, who maybe don't have enough to eat and their children? That is not the response that is typical of the United States of America. We shouldn't do that.
REHMCongressman Levin, talk about how you and other Democrats plan to restore these benefits.
LEVINWell, two things. First of all, I hope it doesn't stay a bipartisan issue. It should not be. We're talking about the lives of a couple million people, more than that over the next six months. So Harry Reid has said that, beginning the first week, when we come back, the Senate's going to act on this. And I'm hopeful, as the stories get out -- you know, these are numbers.
LEVINThis 1.3, they're invisible. We can't contact them. We don't have their names and addresses. If you had them, go from Washington shoulder to shoulder, the line would extend to Lincoln, Neb. And if just a small portion of these people had their stories known, I have to think that this country would respond. We never, never haven't.
REHMBut tell me how you plan to try to restore these benefits and how you might pay for them.
LEVINWell, first of all, traditionally, unemployment insurance has not been offset because it's an emergency. It's kind of an economic hurricane. When we last extended it, we did not offset it. So that's been the typical response. So we're going to come back a few weeks from now. And we're going to say in the Senate, and we're going to say in the House, you need to extend them. We say to the speaker who said he was interested, if it were offset, let's sit down if we need to offset and find a way to pay for it so that these 1,300,000 people aren't in the cold.
REHMAre you looking...
LEVINWe're going to have to do that.
REHMAre you looking at the Senate farm bill?
LEVINThat's one option, but I think there are other options if we offset it. But I think the main thing we have to do on a bipartisan basis is to sit down and say to ourselves, as their elected representatives, are we really going to say to this 1.3 million and then another 1.9 million for the first time when there's been this long-term unemployment? You're going to be without any assistance. We've never cut off 100 percent when there's been this long-term unemployment.
REHMAll right. Tell me...
LEVINSo, in a word, we'll sit down, and we'll sit down, I hope, on a bipartisan basis and address this issue.
REHMWhat chance is there of successfully using the farm bill, for example, as leverage?
LEVINI think that's possible, but if I might say, Diane, I think the main leverage is the lives of 1.3 million.
REHMI understand that.
LEVINI hope people will call into your show and talk as I've heard from them. I hope my colleagues will go out. I hope that the two people -- the reporter -- other reporters are going out and talking to people. I hope the gentleman from Cato will go out to an unemployment office or workforce office and talk to people and see if they're sitting on a couch. I think they'll tell him, no way are we doing that.
REHMAll right. We're going to open the phones now, 800-433-8850, first to San Antonio, Texas. Hi there, Leslie, you're on the air.
LESLIEHi. Thank you. I think it's important to be realistic about what's going on here. If you suddenly cut the unemployment benefits for those people, the devastating effects of the economic shutdown for them is going to leave them gasping for life. If they could just take a job at minimum wage and support their families, they would do it. These people have pride. They've worked all their lives, most of them. And some of them are just out of school and look forward to working and supporting themselves in their independence.
LESLIEWhat's going to happen instead is they're going to waste hours standing in line at the food banks, hours sitting at some office to beg for money to pay for the heat, the electricity in the winter, to pay for whatever they need to stay alive and not be able to continue to make their car payments, to pay for gas and car insurance, to go out and look for a job.
LESLIEThey're not going to be able to make it to the library to use the free internet access there because they can't pay for the car to get to the library. Talk about sitting on their tooshies -- I'm done. If they do find a job at minimum wage, they're still not going to be able to pay all their bills. They're going to take on a second job. They're going to get sick and end up on disability. That's going to be lifelong.
REHMAll right. And, Chris Edwards, do you want to respond?
EDWARDSYeah, I mean, this isn't a sudden -- it's not like the whole system's being thrown out. What we are doing here if these -- these are emergency benefits. The American economy has long been out of an emergency. The system will go back to the basic 26 weeks of unemployment, half a year, that we've had for many, many decades. So -- and this has long been planned. People have known this was coming. The end of the year, these benefits end. They can read any news stories that will say that.
EDWARDSThe second thing I would say is that you can always line up a human interest story to oppose cutting any spending. But this is why we have a massive federal government deficit. I mean, the Republicans just supported a $30 billion increase in defense spending, and they did it with these sort of human interest stories.
EDWARDSNow the Democrats are supporting the $25 billion, you know, UI spending increase. But all these costs are being pushed onto people into the future. We'll have to raise taxes in the future, which is going to hurt the economy and push people into unemployment in the future. So we can't just keep spending.
REHMChris Edwards, he's an economist at the Cato Institute. He's editor of DownsizingGovernment.org. And you're listening to "The Diane Rehm Show." Fawn, who pays for unemployment benefits?
JOHNSONWell, the first six months of unemployment benefits -- these are the regular benefits which will not be cut off at the end of -- after Christmas. I think it's important to understand that. We're talking about long-term unemployment benefits. Those are paid for by the state, and they're run by the state and will continue regardless. The current program for extended unemployment insurance, which has been in place since 2008, is paid for fully...
REHMWhen the recession began.
JOHNSONRight, when the recession began under President Bush, I will point out. That is actually fully paid for by the federal government. In the past, the cost of the extended program has been split between the states and the federal government. But in this particular case, it has been paid for by the federal government.
JOHNSONAnd my -- one of the things that you hear a lot from people like Rep. Levin and other Democrats is that it is not typically offset. They're right. But in the last two or three -- I think there was three times that this particular program now has been extended when it was offset. In other words, they came up with the money in other areas.
JOHNSONThis is becoming a touch point between Republicans and Democrats about unemployment insurance. The question of whether or not it's appropriate to ask that you find other savings in the government in order to help these people who have been unemployed for a long time, I think it's a legitimate conversation to have.
JOHNSONCertainly Mr. Levin has a particularly helpful argument in the sense that this is an emergency, and you do want to help them. But then there are other people like Chris Edwards, and a few others I've talked to, said, it is not -- that's a lame argument. We've known this has been going on for the last year. We've known this is going to happen. We should be able to (word?) $25 billion.
REHMBut, Chris Edwards, when you hear the numbers from the CBO, do you simply say they're not true?
EDWARDSThere's a microeconomic effect and a macroeconomic effect. The microeconomic effect we discussed that most economists, including folks like Larry Summers, agree with that higher unemployment insurance benefits tend to induce people not to go out and make compromises and get a job. That's generally agreed to. What the CBO says is that there's these macroeconomic benefits of the extra spending in the economy.
EDWARDSThat's where economists part ways. I think conservative and free-market economists just don't believe that Keynesian economic effect. I mean, it's the old stimulus issue, and, you know, in my view, we've had the slowest recovery since World War II. And we had the biggest federal government stimulus ever with massive deficits. So, in my view, spending stimulus doesn't really work like that.
REHMOK. Well, let's take the micro view for a moment. What do you personally say to someone who's been unemployed for a long period of time who has gone through his or her own family savings who has a family to feed and no one else to turn to? What do you say to that person?
EDWARDSI would say that you've got to make a couple choices. And...
REHMWhat are the choices?
EDWARDSThe choices are take a lower-paying job...
REHMBut what if there isn't one available?
EDWARDSSuppose you were in Nevada and you were a construction worker -- and they had a huge housing bust -- so you're an unemployment construction worker. You've got to make a tough decision like -- you know, construction is a volatile industry. Maybe I need to move to North Dakota in the oil industry that's booming or maybe Texas...
REHMHow do I get there -- how do I pay...
EDWARDSWell, Americans make those sorts of decisions all the time. They're constantly moving around states. It's a good thing that people move to where the jobs are. And so those are the -- and, again, in the long term, people have to save more. I hope a lesson here is that people know that the American economy may have another big recession, maybe next year, maybe five years from now. People should do all they can to save to get ready.
REHMI want to tell you a very brief story. When my husband and I were first married in 1959, we had our first child David in 1960. He kept getting the croup. And a doctor came to our small house and said, you need to get storm windows for this child's bedroom. We did not have the $50 to get those storm windows. It happens when there are no alternatives. Short break here. We'll be right back.
REHMAs we talk about the budget agreement likely to be voted on in the Senate today, there is a cut-off of long-term unemployment insurance within that plan that would begin Dec. 28. We have three people with us talking about this: Chris Edwards, an economist at the Cato Institute, Fawn Johnson, a correspondent with National Journal, and, joining us from the studio at Wayne State University in Detroit, Congressman Sandy Levin, Democratic congressman representing Michigan's 9th District.
REHMHere's a tweet: "Anyone who thinks the unemployed are lazy have never been unemployed. In order to receive benefits, you have to look for a job, Fawn Johnson.
JOHNSONThe tweeter is correct. In order to receive unemployment benefits, you have to show that you have been making a concerted effort to find work. And I believe that's all done by email these days. It used to be done on paper, but there -- what you do is you have to show that you've been sending out resumes or you've been putting applications in at various places per week.
REHMAnd what if you get a short-term job, say, lasting one week?
JOHNSONWell, then you -- exactly. Then you are no longer eligible for the benefits. So here's where some of the problem comes in. So when I was talking to Sen. Johnson from Wisconsin yesterday, he was telling me about a friend of his or a constituent who was a house painter, got a couple of house painting jobs, tried to hire some people for that house painting job and was told they didn't want to take that job until their benefits ran out.
JOHNSONBut keep in mind that if you're getting, say, $250, $300 a week and you get to go to paint a house for one or two days and get $100, it makes more sense for you to stay away so that you can keep that benefit. So it gets pretty complicated pretty fast.
REHMGosh, I should say. All right. Let's go now to Wilma -- let's see, where is Wilma? She's in Hillsboro, N.C. You're on the air.
WILMAYes. My comment basically is how can we complain about 25 billion over 10 years versus 87 billion per month that the Federal Reserve is giving for bond buying?
REHMCongressman, do you want to take that one on?
LEVINSure. I mean, we can argue about Federal Reserve policy, but that doesn't answer the needs of 1.3 million people. I think your story about storm windows really is so effective, so compelling, Diane, if I might say so. We say to people -- it is heard on this program -- well, you should've expected. But we have never failed to extend the emergency program when we've had the long-term unemployment at this level. It was less than one-half of what it is today when President Bush signed the legislation.
LEVINSo let's not argue about long term -- the Federal Reserve policy. Let's not talk about the savings problem in this country. We have it. Let's focus in not only on the immediate economic impact nationally, but on the lives of 1.3 million people. They're not sitting on their couches. I think those who think so kind of need to get off of their couch and talk to the people who are affected, as I have in many of my colleagues. I just think if we will focus in on this exact situation for families, we'll decide in this country that we should not cut off 100 percent. They've exhausted their state benefits.
EDWARDSCan I make one quick (unintelligible) ?
REHMCertainly, Chris, go ahead.
LEVINThe 26 weeks are gone.
EDWARDSThere is -- one of the data points economists look at is this, is that in the weeks leading up to when people's benefits are exhausted and the few weeks after they're exhausted, there's a giant spike in the number of people who go back to work, which is clear evidence that, yes, most people are looking for jobs very hard.
EDWARDSBut there are some people who do, in fact, sit on the couch. They wait till the very end, and you see this in the data. There's a big spike of people that go back to work. It's because people, at the last minute, think, look, I know that there's this lower-pay job that I didn't want to take, but now I have to take it.
LEVINChris, could I say, I think that there is -- there are some economists who think so, but the overwhelming majority of economists do not believe that that is the basic fact. I read from one economist who studied all of the various analyses. There may be some people who essentially don't take a job for a variety of reasons.
LEVINBut for the overwhelming number of the 1.3 million people, they are looking for work. There are fewer jobs than the people looking for them. Again, look at what happened when Walmart came, 23,000 for 600 jobs. And we're saying to those 23,000, you're sitting on your couch?
REHMYou know, what...
LEVINThat isn't the reality in this country.
REHM...I'd like to understand what the result of cutting off unemployment benefits could be if that happens Dec. 28. Couldn't more people be forced to go on welfare and seek other kinds of government help, Fawn Johnson?
JOHNSONSure. I think that's a very -- that's entirely possible. It isn't something that we've seen estimates about from the CBO when they put out their estimate to the Congress talking about what would happen if you cut off the unemployment benefits. The problem with this issue globally -- I mean, I was thinking about this because I was covering it back in the early 2000 when they had a similar program -- that when you start an extended unemployment benefits program, it's much easier to start than it is to taper off.
JOHNSONAnd so the last time that the program phased out, it was a huge fight on Capitol Hill. And I remember Tom DeLay, who was the majority leader at the time, being very angry about the ruckus that the Democrats were making about cutting off the unemployment benefits. What they finally wound up doing was phasing it out over a couple of years.
JOHNSONI think, and because of the human element that Congressman Levin is so eloquently describing and will continue to describe long after these benefits lapse because it's a very compelling story to be told. And it's a very useful tool in terms of negotiating on Capitol Hill.
REHMWhat states would be most affected by a cutoff in unemployment?
JOHNSONNevada is one of them, and Michigan is another. So you can see why...
LEVINCalifornia, New York, many of them.
JOHNSONMaine is another one.
LEVINWe're talking about...
JOHNSONYeah, so, I mean, and the problem is of course, one of the things that people should probably understand about this program is that the extended benefits don't actually go to everybody in every state that is unemployed for a long time. The way that it works is, in order to qualify for allowing extended benefits to happen as a state, you have to show that your unemployment level is above a certain level than the standard one. So a state like North Dakota, for example, which has an unemployment rate of somewhere in the four or 5 percent, it's very low, will not be offering extended unemployment benefits.
JOHNSONBut Nevada certainly would, and definitely Michigan.
REHMSome opponents of the extension, Chris Edwards, say it's going to hurt small businesses especially. What evidence is there of that?
EDWARDSI don't know what those people are referring to, but the basic UI program is funded by taxes on business. And so one of the basic problems is that -- and we've seen this in recent years -- state unemployment systems have got into trouble, have had to borrow a lot of money. And they've had to raise taxes on businesses right in the middle of this economic slowdown.
EDWARDSSo there's sort of vicious cycle here. If the unemployment rate goes up in states that have bad economies, the state increases taxes on businesses. And so the businesses, of course, have less money to hire people. So that is one of the problems of the current system.
LEVINCould I just add here quickly?
LEVINThis is 100 percent federally financed, so there is no experience rating impact on businesses from this program. And you asked, what's the impact? Two-and-a-half million people, according to census, were lifted out of poverty because of the emergency program in 2012. I think that says what's going to happen if we eliminate this program and send a million three people -- a million people out into the cold on Dec. 28. It's going to increase the poverty rate.
LEVINAs you suggested, Diane, it's going to have people turn to other places. They're going to more and more go into pantries. But I've been into pantries in this state. And, by the way, it's not only Michigan. Many, many, many states are going to be impacted, many of them. I've been to pantries, and the shelves are half empty because there's immense pressure.
LEVINSo we're going to have people who are going to lose their homes, who are going to lose their car when they want to look for work, who are going to, in some cases perhaps, be hungry and have to go to pantries. These are people looking for work. And, by the way, often, like in this state, they have to come into offices periodically and show that they are looking for work and outline where they have looked for work.
REHMAll right. To Doug in Tampa, Fla. Hi, you're on the air.
DOUGYes. I was without work for quite some time, and, you know, I make a six-figure salary. And I would've loved to have gotten a cheap -- you know, any job, even if it was emptying garbage cans, McDonalds, Walmart. They would not hire me because they knew I would leave once I got an opportunity to get another job. So, you know, depending on the job, a lot of people wouldn't consider me because they felt I was overqualified and would leave.
REHMThat's a tough situation to be in, Fawn.
JOHNSONYeah, and here is the problem that -- this is unique, I think, this current economic downturn. Mr. Levin is right that the percentage of long-term unemployed is so much higher than it's been ever. And part of the problem is that we've had this extreme change in our economy such that you have people like our caller who is out of work and can't find a job in these lower wage jobs because I'm sure our caller would agree that if he got a better offer, he would leave the Walmart job...
JOHNSON...or the McDonald's job. But what is happening is that the jobs that are being created tend to be more in the service economy. The jobs that have been lost are in manufacturing and in engineering. And the kinds of jobs that are -- they aren't the ones that are coming back. So how do you make that transition?
REHMSo what do you say to our caller, Chris?
EDWARDSI actually think it's something we could all agree on is we need the U.S. economy to start growing strongly again. The central problem here is that we've had sluggish growth for five years, which is absolutely extraordinary, the worst recession since World War II. It has been terrible. And, you know, the congressman and my, you know, views on what we need to do to stimulate growth probably are different.
EDWARDSBut, you know, things like tax reform, I think, you know, we could all agree, you know, would help businesses hire. Ultimately, we want American businesses to hire people. We want more entrepreneurs starting more companies to hire more people. And I think Congress needs to focus on that more, rather than just dealing with these short term emergencies constantly.
JOHNSONWell, and the one bright spot in the economy, particularly from a Washington perspective, is the Senate is on track to pass this budget agreement. That means that we can avert any kind of government shutdown for two years. That in and of itself will create enormous amounts of stability for businesses that we haven't seen in the last three years. And so the hope -- I mean, I hope -- I don't know -- that that will actually give businesses a little bit more comfort in the ability that they know there's not going to be a crisis and maybe will be willing to hire more people.
LEVINWe've had economic growth.
REHM...of National Journal, and you're listening to "The Diane Rehm Show." Congressman, if Democrats were so strong on this issue of the extension of unemployment benefits, why did you vote for this in the House?
LEVINWell, there -- look, we were faced with a dilemma. And that was, did we need to address the budget issue? And I think there were good arguments we had to do that. There has been some economic growth -- excuse me -- we had to do better. But a number of us voted no. And the reason we did that was to keep the focus on the 1.3 million. We've had economic growth, but we still have this historically high level of long-term unemployed. And we simply need, Diane, to address it. And I hope we'll do that. I hope after the budget passes that more and more, all of us will together turn our attention.
LEVINThe gentleman from Cato talks about the need for us to have more economic growth. I agree. I'm on Ways and Means. We'll talk about tax reform. We'll talk about other things. But this doesn't resolve the dilemma, the economic hurricane, as I said earlier, that is facing 1.3 million people who are looking for work and can't find it.
REHMFawn Johnson, how do you think this issue is going to play out in the 2014 election?
JOHNSONWell, they could go two ways. And it really depends on what happens on Jan. 6 when the Senate returns. If the Democrats insist on pushing for a one-year extension that does not offset, which is their opening bid and they do not negotiate, then it will become a 2014 election issue. Keep in mind that the election is a long way away from January, so it's hard to know how much that will play out at that point. But certainly the ripple effects are going to be something that Democrats are going to be keeping track of and talking about throughout the year.
JOHNSONThe other thing that could happen, though, is that I am sensing some willingness on the part of Republicans to talk about something. Now, I don't think it is a full year extension, and I don't think it is something that they do need to pay for it. But if Democrats are willing to work with them, there's a possibility that they could resolve it relatively quickly in the first few months of Congress. And then we wouldn't have to deal with it. I don't know how that affects the 2014 elections, but certainly it would probably be better for the Congress in general.
REHMHow do you see it going, Chris?
EDWARDSI've seen a lot of Republican cave-ins recently. The budget deal, in my view, is a big Republican cave-in. They gave Democrats everything they wanted. This is very sad from my point of view. I think all this extra spending is ultimately not good for the economy. It's enslaving the next generation of young people who are going to have to pay it back. So, you know, John Boehner says he's against this unemployment extension. We will see. He's caved in a lot recently, and unfortunately he'll probably cave in again.
REHMCongressman Levin, briefly, how do you see it going?
LEVINI think providing extended insurance, as we always have with high-level unemployment isn't caving in. It is essentially responding to what is best in our country. We don't leave 1.3 million and then another 2 million out in the cold while they're looking for work and can't find it.
REHMCongressman Sandy Levin, Democrat congressman representing Michigan's 9th District, Fawn Johnson, correspondent for National Journal, and, Chris Edwards, he's an economist at the Cato Institute, editor of DownsizingGovernment.org, thank you all so much.
EDWARDSThank you, Diane.
LEVINThank you. Thank you very much, Diane.
JOHNSONThank you, Diane.
REHMI wish you good holidays. Thanks for being here. And thanks for listening, all. I'm Diane Rehm.
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