Unemployment Extension 2014: Is The GOP Right About The Unemployment Rate Dropping Due To Ending Benefits?

Unemployment Rate

The unemployment extension debate in 2014 has divided Republicans and Democrats, with the former arguing that the unemployment extension should be dropped in order to encourage Americans to seek jobs, while Democrats believe unemployment benefits should be renewed indefinitely, or at least until the United States economy has improved significantly. But what does the recent unemployment rate numbers tell us about who may be right?

In a related report by The Inquisitr, some Republicans have infamously called unemployment benefits a “hammock” for the lazy. But the unemployment extension has split even some Republicans, with one GOP senator hoping to encourage his fellow party members to vote in favor of the 2014 unemployment extension by tying it to a massive tax cut bill. John Boehner’s opposition to the 2014 unemployment extension has caused one man to be arrested after he sent death threats to the House majority leader.

In general, unemployment benefits are intended to be a trampoline that bounces back workers into a job without losing everything. But some people fear that the unemployment extension has caused these benefits to become a hammock where some Americans have chosen to be lazy rather than actively seek a job. For example, economist Fred Giertz of the University of Illinois believes “tough love” is necessary and dropping the unemployment extension could force the jobless to work harder at finding work. The Congressional Budget Office (CBO) agrees with this assessment, saying that an unemployment extension could cost $26 billion over 10 years and they say job-seekers may “reduce the intensity of their job search and remain unemployed longer.” At the same time, the CBO also points out that US economy would be helped by the unemployment extension since the unemployed would spend the money received from benefits in their local economy. Critics of this position say that’s like borrowing from Peter to pay Paul, but in the end it still amounts to 200,000 jobs being created due to the GDP increasing by 0.2 percent.

Unemployment Rate 2014

The debate over renewing an unemployment extension has largely hinged on whether or not the unemployment rate is helping or hurting the overall economy. With the 2014 unemployment rate dropping to 6.3 percent, the number of new jobs added in a single month was at a 2.5 year high, and the number of people using unemployment benefits dropping by 11 percent (that’s not including the 1.3 million Americans who were dropped when the unemployment extension expired), this would seem to indicate the GOP was right.

Yet the participation rate also dropped sharply, with 988,000 Americans simply giving up finding jobs, which is part of the reason the unemployment rate dropped so hard. Overall, 101.77 million working age Americans do not have a job. As a comparison, in April of 2000 5.48 million Americans were unemployed and 69.27 million Americans were not participating in the labor market, with the unemployment rate being a low of 3.8 percent. This means in 14 years 27 million more Americans have exited the labor market entirely. But Reuters writer Ryan McCarthy points out that Democrats can’t really use the participation rate as a counter-argument:

So how do we interpret this data? It’s possible the cancellation of unemployment insurance may have spurred some to find work, and Republicans will point to those figures. Democrats, on the other hand, have the difficult job of creating a counter-argument without bringing to light the fact that the number of people outside the workforce has increased dramatically in recent years. For those who don’t care about such political games, the third choice is to consider a balance of all the factors creating the grim outlook we see in the US economy.

Do you think Congress should not pass the 2014 unemployment extension? Or do you believe the longer-lasting unemployment benefits are necessary in the case of the ongoing recession?