Why Unemployment Insurance Stifles Economic Growth

By: Michael Clayton

Unemployment insurance for 1.3 million long-term unemployed Americans expired on December 31^st as Congress was unable to reach a deal to extend the benefit that pays out around $300 per week.

This has Democrats up in arms complaining about the heartless nature of any person who would oppose such an extension. Many Republicans are now open to an extension, but they would like to make sure that there is a way to pay for such a program before passing this controversial legislation.

To appease the other side, Senate Democrats are now pushing to “pay” for the extension with the promise of future spending cuts. Sound familiar?

That is because this is the same approach that was taken during the recent budget deal. By promising future spending cuts, the deal to extend unemployment insurance would most likely extend the spending cuts required by the sequester for another year.

Democrats blasted Senator Paul’s comments on the issue as “insulting to Americans” after he came out against extending unemployment insurance. Sen. Paul’s argument is that letting people receive such benefits beyond the 99 weeks they are allowed-- unless Congress extends the benefits-- creates citizens who are dependent on the government for a paycheck.

In Sen. Paul’s words, “The unemployed need a strong job market, not endless handouts that create dependency.” This is a strong argument when considering the job numbers that were released this Friday.

Although the unemployment rate has dropped to 6.7%, only 74,000 jobs were created and the labor force participation rate was down to 62.8%, the lowest in over 30 years. These abysmal numbers all but prove the argument that many Americans have become comfortable with government dependency and no longer see it as negative to receive benefits.

On the other hand, whether “paid” for or not, the cost of Unemployment Insurance on the American economy is not something that is going to help create more jobs.

Whether or not the extension is paid for is, in the end, beside the point, since offsetting the extension is merely moving some of the deck chairs on America’s fiscal Titanic.

Requiring taxpayers to subsidize the unemployed will not help stimulate growth, but taking capital out of the private market will stifle the private sector and guarantee high unemployment. When considering the statists who are in favor of extending such programs, Dr. Ron Paul has written:

“The question they won’t even consider is what would they do if it were shown that extracting funds from the productive economy to subsidize unemployment results in prolonging the unemployment and actually increases the number of jobs lost? As funds are drained away from those who are barely hanging on and trying to expand their business, the economy is made weaker.” (Liberty Defined, pg. 201)

This issue has nothing to do with helping out the people who need temporary assistance when looking for new employment opportunities. Unemployment benefits are still being paid out to those Americans who have been out of work up for up to 26 weeks.

An important principle that Dr. Paul taught me was in order for the government to give something out, it must first take it from someone else who worked for it.

Entitlement spending suffocates an American economy that is already on its knees. Government needs to remove itself from the equation and let that money be spent on adding to struggling payrolls.

Instead of debating another extension of unemployment insurance, Congress should be repealing taxes and regulations that hamper job creation and entrepreneurship. A good place to begin would be to repeal ObamaCare.

But it is much more likely that Congress will pass the extension of unemployment insurance any day now, and the American economy will continue its steep downward trend.