Will Bush Extend A Hand to Jobless?
WHEN the employment numbers for July are released in Washington this morning, the number of jobless in the United States will likely remain above 8 million. The consensus forecast of economists is that the unemployment rate will be 7 percent, same as in June.But Lacy Hunt, chief economist for HongkongBank Group, predicts the rate will rise to 7.2 percent. The trend may be important to legislation expected to move through Congress today providing for an extension of unemployment benefits. Mr. Hunt reckons that if unemployment worsens, President Bush will probably not veto the bill; if the rate stays the same, he likely will veto the measure pushed by the Democratic leadership. Richard Darman, director of the Office of Management and Budget (OMB), warned of a possible veto in a letter sent Sunday to Sens. Lloyd Bentsen (D) of Texas, who sponsored the Senate bill, and Bob Packwood (R) of Oregon. For Democrats, the extension measure is a political pleasure. "It puts the president in a spot," noted a staff official for a Democratic representative. "It is an issue that resonates in middle America." The bill will provide up to 20 additional weeks of unemployment insurance benefits for people whose basic 26 weeks of payments have expired. Most people have considerable sympathy for those made jobless by the recession. A veto, noted the staffer, will make the president look "Scrooge-like." In a statement Monday, Senator Bentsen said: "I hope that the president can be persuaded that it is important to extend a hand to the millions of Americans who can't find work." Mr. Darman's first objection to the House version of the bill is that it would require the president to exempt the $5 billion or so cost (in fiscal 1992) of the extended benefits from the Budget Enforcement Act as an "emergency." It would add to a deficit already forecast by the OMB at a record $348.3 billion next year. Bentsen notes that the president asked Congress to provide assistance to the Kurds, Israelis, and Turks as an "emergency." So "we're asking the president to join us in recognizing that American workers also need our help in time of trouble." Such arguments make the dispute a case of fiscal prudence versus financial kindness for the jobless. On the economic level, the Bush administration says the "emergency" designation was not warranted because the recovery is under way and by historical standards the current unemployment rate "is not cause for congressional action." The jobless rate was higher - 9.8 percent - when an extended benefit program was put in place in the last recession. Bentsen counters that the recovery from the 1990-91 recession will be "muddled," rather than "swift and robust;" that millions of workers will still be losing their jobs after the recession is technically over; that 3.1 million workers will exhaust their benefits in the fiscal year ending Sept. 30 and another 3.4 million in the next fiscal year. Without extended benefits, "times are going to get even tougher" for the jobless, he states. Another point made by the administration is that additional unemployment benefits increase the unemployment rate. Economic analysis does show that the jobless shop around for the right new position longer on average when benefits are either raised or extended. One study found that for each extra week of benefits, the unemployed tend to stay out of work nearly a day longer. Another found that a 10 percent boost in the "replacement ratio the proportion of after-tax work earnings replaced by unemployment benefits - results in the jobless delaying going back to work for 1-1/2 weeks. The jobless don't want just any job a s a rule - they want one with "adequate" pay and in a "suitable" field. The chance of a person on unemployment insurance going back to work increases rapidly as the time of benefit exhaustion approaches. Some employers may have unwritten arrangements to bring back those laid off as unemployment benefits expire. Some jobless undoubtedly enjoy extra leisure. Yet surveys also show that most of the unemployed would like nothing more better than getting back to work. It will be difficult for Mr. Bush to persuade most of the unemployed that they don't deserve or need extended benefits while continuing their job search.