Gene Sperling issues panicked call for extended unemployment benefits

Tim Cavanaugh Contributor
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A top member of President Obama’s economic brain trust greeted 2014 with a rambling, anti-economic plea for the twelfth extension of federal unemployment spending, ignoring the administration’s own role in winding down extended unemployment benefits.

“This New Year’s Day, there is likely less joy and more fear and distress in the homes of 1.3 million Americans who this week have seen their unemployment insurance suddenly cut off,” Gene B. Sperling, director of the National Economic Council, wrote Wednesday in a statement heavy on vague claims and strawman arguments.

“The claims by some that those experiencing long-term unemployment are solely at fault are belied by the countless accounts of the names, faces and stories of responsible Americans among those 1.3 million who have worked hard their whole lives and are fighting to find a new job to support their families,” Sperling wrote.

Sperling did not name anybody who supposedly made this claim. In fact, it is hard to find anybody claiming the long-term unemployed are solely responsible for the stagnant economy, and virtually impossible to find any prominent politician or pundit making this claim.

Proponents of reducing the extended federal emergency jobless benefits program — which began under President George W. Bush in 2008 and has been extended 11 times since then — instead argue that extended benefits correlate strongly with higher long-term unemployment and that broke federal and state governments have no more money to cough up. At their most outré, reduced-benefits advocates might argue that paying a person not to work, though it may be a merciful act in the short term, lessens that person’s incentive to find employment and increases his or her incentive not to settle for a less attractive or lower-paying position — a completely non-controversial point that few economists would dispute.

Sperling doesn’t mention that a majority of congressional Democrats agreed to end emergency benefits at the end of the month, as did President Obama. The Ryan-Murray budget deal that ended sequestration of some federal spending also ended the federal unemployment guarantees — which kick in after state benefits are used up. More Democrats than Republicans voted for the high-spending budget compromise in December. Sperling’s own boss signed the budget during his Christmas vacation in the low-unemployment state of Hawaii.

Nevertheless, Yale Law School alumnus Sperling, whose private sector experience consists mainly of leveraging his political connections for extremely lucrative speaking and consulting contracts, predicted dire consequences if the federal government stops paying people not to work — and big success if it continues doing so.

“Failing to extend emergency unemployment insurance through 2014 will negatively impact 14 million Americans — the 4.9 million workers who will see unemployment insurance cut off and the approximately 9 million additional family members they are supporting,” Sperling wrote. “But if Congress does the right thing and acts to extend emergency unemployment benefits through 2014, it is estimated to lead to 200,000 jobs and a fifth of a point of additional economic growth.”

Sperling did not explain his contention that paying unemployment benefits will create 200,000 jobs, but presumably this has to do with the “multiplier” theory, which holds that government spending creates more than 100 cents of value for every dollar spent. Though the multiplier is obviously false at the level of basic math and has been repeatedly discredited in both laboratory and real-world experimentation, it is treated with great seriousness in schools like the University of Pennsylvania’s Wharton School of Business, Sperling’s alma mater.

Sperling’s statement also ignores the correlation between extended unemployment benefits and higher unemployment, which is shown very strongly in state unemployment rates. The ten states with the lowest levels of unemployment are all in the least generous tier of unemployment benefits, cutting off the jobless after 40 weeks. By contrast, of the ten states with the highest unemployment rates, all but one (Michigan) pay more than 52 weeks of unemployment.

All states, regardless of political leadership, have been reducing the length of their unemployment payments for several years, belying Sperling’s insinuation (and the outright accusations of the president’s media allies) that this is a simple case of heartless Republicans victimizing the jobless.

Sperling also avoids mentioning the total economic stagnation that has characterized Obama’s presidency. Since Obama took office in 2009, unemployment has never gone below 7 percent; labor force participation rate has dropped by three percentage points to a level not seen since Jimmy Carter’s presidency; and income inequality — which the president frequently decries in long speeches — has increased faster than at any time in the modern era. (Related: Rich get richer, rest stagnate in economic ‘recovery’)

Obama recovery claims by College Democrats

Job creation in Obama’s time has been extraordinarily weak. The post-recession “recovery” long ago set the record as the weakest jobs recovery of the postwar era, and it may in fact be the worst in the history of the United States. Following the two severe recessions that made up the Great Depression, unemployment reduction was far more rapid than it has been since 2009. While the economic history of the 19th century is largely ignored and fictionalized by modern macroeconomists, the recessions or “panics” of that era were typically sharp, deep, and followed by robust job growth.

By contrast, job creation since Obama took office has averaged 180,000 per month. At that rate, the economy will not return to the pre-recession jobs peak until 2020, three years after Obama leaves office. (Related: Obama admin: Economy ‘stronger’ with 180,000 jobs a month)

Sperling, is best known for warning Washington Post reporter Bob Woodward that he would “regret” reporting some accurate information about the president’s budget shenanigans, but he is also a past master at getting media dupes to use terms like “Armageddon” to describe what might happen if taxes and spending do not increase rapidly. Sperling’s Chicken Little style was on full display in his unemployment statement.

“At a time when we as a nation should be moving forward in our efforts to help those who are long-term unemployed find new jobs, we should not take a harsh step backwards by abruptly cutting off their unemployment insurance,” Sperling wrote.

The Senate is expected to vote next week on a bill to restore unemployment benefits sponsored by Democratic Sen. Jack Reed of Rhode Island and Republican Sen. Dean Heller of Nevada. Sperling has been leading the administration’s public campaign in favor of that bill, with a series of press conferences and long statements.

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