September 1, 2014

Senate Plan on Jobless Benefits Needs Better Funding

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A bipartisan plan in the Senate to extend emergency unemployment benefits could provide badly needed assistance for individuals and avoid a dampening effect on the economy. Unfortunately, the proposed financing of the 5-month extension is flawed.

Sponsors say the legislation would help more than 2 million job-seekers who have lost their unemployment coverage since December, when Congress allowed emergency benefits to expire.

The Senate is expected to pass the new measure after the congressional recess, but it faces considerable opposition among House Republicans. The plan would increase direct government spending by $9.9 billion this year.

Unemployment benefits provide effective support for a slow economy because recipients spend the money quickly, helping a wide range of businesses. So it makes sense to pay for these benefits in a way that will not put an immediate drag on the economy.

The Senate plan, however, relies heavily on a “pension smoothing” gimmick that would allow companies to pay less into their pension plans and actually cost the government money in the long run. Much of the other funding -- from extending customs fees -- would not come until 2024.

The Senate should find more responsible ways to pay for the extended unemployment benefits before sending the bill to the House.