Dear Congress: Stop worrying about the deficit, and start worrying about the unemployed. Especially the long-term unemployed.
It's been over four years since the recovery officially began, but it still feels like a recession to most people. Maybe that's because with three unemployed people for every job opening, things are still as bad as they ever got last recession. Not that Washington has paid much attention the past few years. It's been too preoccupied with short-term deficits to care about long-term unemployment. That was obvious when a Congressional hearing in April about people out of work for six months or more drew all of ... one senator at the start. And it is even more obvious now with the latest budget deal.
Now, the Paul Ryan and Patty Murray deal is about as small-bore as deals get. It replaces $63 billion of sequester cuts the next two years with $85 billion of
taxes "user fees" on airline tickets and other assorted cuts. Among these other assorted cuts are, as you can see in the chart below from Matt Berman, things like making federal and military workers contribute more to their pensions, and cracking down on omnipresent waste and fraud. Like I said, little things.
Still, replacing some of the sequester's deliberately stupid cuts with smarter ones is, well, smarter policy. Or at least less stupid. This agreement would make us marginally less so by increasing discretionary spending $45 billion in 2014, and $20 billion in 2015—and returning to sequester levels thereafter. You can see this modest bump in the chart below from Yuval Levin. The purple dotted line is the sequester "relief."
It's not much, but it's better than nothing—which is what the unemployed are getting. See, this deal doesn't come up with the $25 billion we need to fund extended unemployment benefits. It cuts the deficit another $23 billion on top of the sequester instead. As a result, 1.3 million people will lose their benefits on December 28th, and deficits won't be any statistically smaller.
We could do so much better—if Republicans would let us. But they won't. They refused to include extended unemployment benefits in the deal, because ... the world needs ditch-diggers too? Actually, yeah. They think the only reason someone couldn't find a job today is if they're lazy—or addicted to drugs—so we just need to kick them off the dole to make them less lazy. Then, once the unemployed are desperate enough, they'll take whatever crappy job they can find.
It's social Darwinism masquerading as economics. It ignores that there are still three unemployed people for every job opening; that companies won't even look at the resumés of the long-term unemployed; and that the CBO estimates extended benefits would actually add 200,000 jobs the next year from all the extra household spending. Oh, and it ignores that there are plenty of conservative proposals for dealing with long-term unemployment beyond yelling at them to go out and get jobs that don't exist.
Michael Strain of AEI, for one, thinks the government should give people relocation vouchers to cover the cost of moving from high to low unemployment states. Or subsidize wages for the long-term jobless. Or provide better jobs training. Kevin Hassett of AEI agrees with all of the above, but thinks the government might need to directly hire the long-term unemployed too.
But all of these things cost money, and Republicans don't want to spend money on the long-term unemployed. They want to cut spending—at least when that spending isn't for sugar-growers or farmers. Democrats do want to spend money helping the long-term unemployed, but not enough to blow up a budget deal that barely, just barely, cuts red ink.
I hope $23 billion of deficit reduction is worth that.